When planning for the future, Whole of Life Insurance has always offered a method of providing a guaranteed payout to your loved ones whenever you pass away – provided the premiums are paid. But upcoming pension tax reforms from April 6, 2027, which could significantly impact estate planning, making this form of cover more important than ever.
What Is Whole of Life Insurance?
Whole of Life Insurance – also known as life assurance – provides permanent cover. As long as your premiums are paid, a lump sum is guaranteed to be paid out on death, which can help cover a host of expenses from funeral costs and debts, to inheritance tax, and the desire to leave a legacy.
Whole of Life Insurance has always offered peace of mind—but with the April 2027 reforms bringing pensions into the estate for IHT, it is more important than ever. By combining permanent cover with proactive planning, you can protect your loved ones from looming tax liabilities.
From 6 April 2027, most unused defined contribution pension pots and death benefits will be included in your estate for Inheritance Tax (IHT).* This is a major shift from current rules, where pensions are usually excluded.
Key changes include:
Unused pension pots being added to estate assets for IHT valuation.
The Personal Representatives becoming responsible for reporting and paying pension-related IHT – not pension providers.
Projected impact:
According to the HMRC Policy Paper* published July 2025:
10,500 estates will pay IHT for the first time.
38,500 estates will pay more IHT than before.
Average additional IHT liability: £34,000. Some estates may see tens or even hundreds of thousands in extra tax liabilities.
Who Should Be Aware?
Anyone with considerable assets plus a sizeable pension.
People wishing to leave their wealth to adult children or other eligible beneficiaries.
Personal Representatives and families needing smoother estate administration.
It is never too early to start planning. Failing to plan now could mean unexpected tax bills and complications later.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
Estate Value – £1,000,000
Residence Nil-Rate Band (RNRB)
| Scenario | Allowances | Taxable Estate | IHT Rate | IHT Liability |
|---|---|---|---|---|
| Single person, no property to children | £325,000 (NRB only) | £675,000 | 40% | £270,000 |
| Single person, property left to children40 | £325,000 (NRB) + £175,000 (RNRB) = £500,000 | £500,000 | 40% | £200,000 |
| Married/civil partner, first death (everything left to spouse)60 | 100% spouse exemption | £0 | £0 | £0 |
| Married/civil partner, second death, estate left to children with home60 | 2 × £325,000 NRB + 2 × £175,000 RNRB = £1,000,000 | £0 | £0 | £0 |
| Married/civil partner, second death, no RNRB (e.g. no home or not to children) | 2 × £325,000 = £650,000 | £350,000 | 40% | £140,000 |
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
Provides guaranteed funds outside your pension estate—funds not impacted by pension IHT rules—offering secure legacy solutions.
Choose a policy with fixed premiums for predictable long-term cost planning—helpful amid pension-related uncertainty.
Can be used to cover potential IHT liabilities, including those on pensions, preserving financial security for heirs.
| Feature | Whole of Life | Term Life |
|---|---|---|
| Duration | Lifetime | Fixed Term (e.g 20 years) |
| Payout | Guaranteed | Only if death occurs during policy term |
| Cost | Higher | Lower |
| Estate Use | Ideal for legacy and IHT planning | Better for temporary needs |
Pros
Cons
Why Write a Whole of Life Policy into Trust?
1. Keeps the payout out of your estate
Example:
If John takes out a £300,000 WOL policy but doesn’t write it in trust, that £300,000 becomes part of his estate. Now, his estate grows by £300,000. This means a larger tax bill and defeats the purpose of the taking out the policy in the first place.
2. Quicker access to funds
This is crucial for timely payment of IHT—since HMRC expects it within 6 months of death. Delay = interest + penalties.
Once your policy has started we help you to place your policy in Trust as part of our service.
Trusts are not regulated by the Financial Conduct Authority.
The simple table below gives an idea of the cost of whole of life cover *based on a healthy male, non-smoker.
Quotes produced August 2025 and are monthly premiums based on non-smoker rates.
Please note that any monthly premiums mentioned are indicative only and based on this specific case study/ example, which is shown for information purposes only. The monthly premiums shown are an average of the 5 cheapest insurers. Your own circumstances will determine whether the amount payable is more or less than the figure quoted.
| Age | Term | Amount insured in £ | Monthly Premium (£) |
|---|---|---|---|
| 40 | WOL | £75,000 | £57.13 |
| 60 | WOL | £75,000 | £112.80 |
Review your pension and estate – understand your total assets in light of 2027 changes. And review your Wills
Understand your allowances and relief amounts
Speak to an adviser to discuss options to reduce taxable estate – Gifts, later life planning
Speak to an adviser for whole of life insurance quotes – to cover potential IHT costs.
Compare fixed vs reviewable premiums, and standard versus investment-backed policies.
Update beneficiary nominations and wills to ensure they are in line.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills are not regulated by the Financial Conduct Authority.
The application process can be quicker and easier by speaking to an expert adviser, who knows the market and the process.
At Future Proof, we work directly with leading UK insurers and have in-depth knowledge of what they can offer individuals with IHT requirements.
We’re here to help you find the right cover and the support you need.
* Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, products or services by us or St. James’s Place. Please note that clicking a link will open the external website in a new window or tab
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