Defined Contribution Pension Estates Shake-up Boosts Onshore Investment Bond Use
London, 2nd June 2026 – The inclusion of unused defined contribution (DC) pension funds in estates is shaking up advice and boosting the use of onshore investment bonds as a solution, new research1 from Chesnara Life (UK) Ltd shows.
On average, advisers say more than a quarter (26%) of clients are already overhauling estate planning advice ahead of the measure which comes into effect in April next year, the study found.
Around one in eight (13%) questioned for Chesnara Life’s Onshore Bond Adviser Sentiment Survey said 40% or more of their clients are changing their estate planning strategy now.
That process will continue throughout the year – by the time unused DC pension funds are included in estates, advisers estimate on average that 30% of clients will have amended their estate planning. More than one in five (22%) estimate 40% or more of their clients will have changed their estate planning.
The research, which investigates advisers’ use of onshore investment bonds as well as their views on key market issues, found that they expect to make greater use of onshore investment bonds, and onshore investment bonds combined with trusts as key solutions.
Around 71% of advisers said they expect to increase their use of onshore investment bonds with estate planning clients following the inclusion of unused DC pension funds within estates. A similar proportion, 68% anticipate making greater use of onshore investment bonds with trusts. This compares with just 27% who expect to increase their use of funds more broadly and 22% who plan to rely more on cash and equity ISAs. Meanwhile, one in five (20%) advisers said they would make greater use of property wealth, while 10% expect to increase gifting through lump sums.
The research found advisers believe estate planning has already become tougher ahead of the unused DC pension funds change – 81% questioned said IHT and estate planning had become more challenging and complex in the past two years.
Mark Lambert, Head of onshore bond distribution, Chesnara Life (UK) Ltd, said:
“The inclusion of unused DC pension funds in estates from April next year is already having a significant impact on clients and advisers with many having to completely overhaul their estate planning.
“Previously for many clients, estate planning had a core focus on maximising pension investment but with that avenue being effectively blocked from April 2027, onshore investment bonds and trusts are emerging as a major alternative solution.
“That reflects what we’re hearing from advisers: as estate planning becomes more complex, trust-based planning, often alongside onshore investment bonds – is moving higher up the agenda, underlining the need for more support from providers.”
“In the survey, 68% of advisers said they anticipate making greater use of onshore investment bonds in conjunction with trusts for estate planning clients.”
Onshore bonds offer zero tax on cash dividends at a policyholder level while non-dividend income is taxed at 20%. Capital gains realised within the Bond are subject to UK life fund taxation.
This “fund level” taxation treatment of income and capital gains results in a full basic rate income tax credit being available to the investor when a chargeable event arises. This, in effect, means that the policyholder is treated as having already paid basic rate income tax on these gains. Top slicing relief and 5% p.a. tax deferred rules on withdrawals remain. Lifetime transfers by way of assignment without consideration are generally not treated as taxable events.
For more information, view Chesnara Life’s Estate Planning Manual here:
www. Chesnaralife.co.uk/documents/estate-planning-manual
Ends
- Chesnara Life commissioned independent research company Pure Profile to interview 200 UK financial advisers during April 2026
About Chesnara Life (UK) Ltd
Chesnara Life (UK) Ltd, formerly HSBC Life (UK) Limited, is a UK subsidiary of Chesnara plc. Chesnara Life offers its open architecture Onshore Investment Bond as a stand-alone offering or through a range of third-party investment platform partners. The Chesnara Life Business Development Team supports all versions of our Bond. The Chesnara Life Onshore Investment Bond provides individual investors with access to over 4,800 funds (Investment Trusts, Open Ended Investment Companies, Unit Trusts and Exchange Traded Funds) from more than 200 Fund Managers. chesnaralife.co.uk
Chesnara Life (UK) Ltd is authorised by the Prudential Regulation Authority (“PRA) and regulated by the Financial Conduct Authority (“FCA) and the Prudential Regulation Authority (“PRA”). Our Financial Services Register number is 133435 and our registered office is at: 2nd floor, 33-34 Winckley Square, Preston, Lancashire, PR1 3JJ, United Kingdom. Registered in England number 88695.
Media Contact:CDR – Jonathan Flint – Jonathan.Flint@cdrconsultancy.com