Rural residents and farmers funnel more money into ISAs following IHT changes
Farmers and rural families are funnelling more money into ISAs as well as withdrawing money to gift to family members, according to new research undertaken after changes to inheritance tax took effect in early April.
Three-quarters of farmers questioned in a recent study by NFU Mutual, the UK’s leading rural insurer, said they had made recent investments – including into Junior ISAs and investment bonds.
The twice-yearly investor sentiment survey, which questioned 374 rural customers including farmers between late April and early May, found signs that individuals, particularly in the 55-64 age group, were shifting away from putting money into pensions and were instead putting cash into savings, investment bonds or stocks and shares ISAs.
The proportion of rural customers investing in stocks and shares ISAs was the highest since the survey began in August 2021, according to the research.
The study was undertaken just weeks after a major shake-up to inheritance tax was implemented in April which saw Agricultural and Business Property (APR/ BPR) tax relief capped. From next April, unspent pension pots will also come within the inheritance tax net.
The Office for Budget Responsibility (OBR) has forecast that 9.5% of deaths could trigger inheritance tax bills by 2029-30 up from 5.2% in 2023-24.
NFU Mutual’s research also found that some customers grappling with the rising cost of living were now dipping into their savings – but typically these withdrawals are coming from cash savings rather than their longer-term investments.
Some in the study said they were withdrawing money to supplement their income or pay unexpected bills, but others said they were financially supporting family members with gifts or loans - often as part of inheritance tax planning.
David Nottingham, personal finance expert at NFU Mutual, the UK’s leading rural insurer, said: “More rural customers are protecting their wealth by minimising potential losses through less risky investments and using tax wrappers such as ISAs. This comes at a time when frozen income tax thresholds and rising incomes mean that more people are steadily being dragged into higher tax bands.
“There are also signs that some people are prioritising saving and investing – rather than putting additional money into their pensions – which is perhaps a response to the changes in inheritance tax which will see unspent pensions come into the IHT net from next April.
“There are also indications that some people are withdrawing money to cover rising costs or are supporting family members with gifts or loans – often done for inheritance tax saving purposes.”
The study shows that customers aged 55-64 – the so-called pre-retirement group – were significantly more likely to say they have put money into stocks and shares ISAs -with 27 % saying they had done this compared with 16% of customers aged 65-74.
This age group was also significantly more likely to have sought financial advice in the last three months as they prepare for retirement.
Consumers continue to cite geopolitics and the rising costs of fuel and energy as the main drivers of financial concern. However, there are indications that customers feel less negative about their longer-term finances than six months ago with customers aged 55-64 viewing the current pressures as short-term.