£1.8bn in net inflows landed at Royal London in the first half of the year, pushing assets under management to a record £43.6bn as advisers steered clients toward life cover to offset an incoming pension inheritance tax. Unused pension savings and death benefits become subject to inheritance tax from April next year, under rules announced by former chancellor Rachel Reeves in her 2024 Budget. Royal London chief executive Barry O'Dwyer confirmed that demand for life insurance taken out specifically to fund the anticipated tax bill has risen materially.
How the liability arises
The arithmetic is not complicated. Pension pots previously sat outside an estate for inheritance tax purposes; from April they will not. For a small-business owner with accumulated pension savings, O'Dwyer noted the threshold can tip without a particularly large pot. The worst-case outcome he described is a forced sale of the business to fund the bill. Advisers are responding with a direct fix: a life insurance policy sized to the projected tax liability, with the payout earmarked for the estate. O'Dwyer said customers are turning to advisers in volume, and advisers are recommending life cover as the practical answer.
Record AUM and money market flows
The £43.6bn record does not rest on pension-tax anxiety alone. Royal London's money market fund, one of the largest in the UK, has grown rapidly as some investors pull back from equity markets amid concern about overheated AI valuations. O'Dwyer described two distinct customer profiles driving the flow. Some want short-term deposits as a holding position while markets settle; others are running return comparisons and concluding that cash yields justify the shift. Both are landing in the same product.
Policy uncertainty and the October 28 Budget
O'Dwyer's call ahead of Chancellor John Healey's first Budget on October 28 is specific: clarity before the date. The concern has precedent. In the months before Labour's second Budget in November 2025, speculation over pension tax-free lump sum rules prompted savers to withdraw billions pre-emptively. Royal London, Standard Life, Hargreaves Lansdown and AJ Bell collectively wrote to Healey last week asking him to rule out any changes to tax-free cash rules, describing the current situation as a "damaging cycle of uncertainty" for pension savers.