The problem with holding on
For a generation that has worked hard to build up savings, pensions, and property, financial security understandably comes first. Longevity makes this a genuinely difficult calculation, not an excuse for inaction: according to the Office for National Statistics, a 65-year-old today can expect, on average, a further 19.8 years of life if male and 22.5 years if female — figures projected to rise further still. In practical terms, a couple retiring at 65 today should reasonably plan for at least one of them to still be alive in their late 80s, with a real possibility of reaching 90.
Faced with that kind of time horizon, it’s entirely rational to want to keep a healthy buffer. The risk, though, is that “keeping a healthy buffer” can tip into holding onto considerably more than will ever actually be needed — with the surplus simply passing to HMRC rather than to family, because a plan for the excess was never put in place.
The problem with giving too much, too soon
The opposite risk is just as real. Gifting can be one of the most effective ways to reduce a future Inheritance Tax liability, but gifting is, by definition, giving up access to money you might later wish you still had. Without a clear picture of future income, expenditure, and life expectancy, it’s very difficult to judge with confidence how much can safely be given away during your lifetime without compromising your own financial security.
Why “how much is enough” doesn’t have one answer
There’s no single number that tells you how much retirement income is “enough” — it depends on the lifestyle you want. The Retirement Living Standards, produced annually by the Centre for Research in Social Policy at Loughborough University on behalf of the Pensions and Lifetime Savings Association, offer a useful reference point, modelling minimum, moderate, and comfortable retirement scenarios for single people and couples. It’s worth noting these figures typically exclude housing costs, care costs, and tax, so the pre-tax income actually required is often higher still — a reminder that generic benchmarks are a starting point for a conversation, not a substitute for a plan built around your own circumstances.
Cash-flow modelling: turning the tension into a decision
This is where structured, personalised planning earns its keep. Cash-flow modelling is a financial planning tool that projects your income, expenditure, assets, and debts forward year by year, under a range of assumptions and scenarios. Rather than guessing at how much surplus you might be quietly accumulating, or how much you could gift without regret, a cash-flow model gives you a visual, numbers-based answer.
Used well, this kind of modelling can help you see, for example, the difference in outcomes between retiring at 60 versus 67, or the long-term impact of making a gift to children now rather than in seven years’ time, all set against your own projected spending and life expectancy. For many people, the result is not a dramatic change of plan, but genuine reassurance — either that they can afford to be more generous during their lifetime than they realised, or that their current spending plans are exactly right and no further gifting is appropriate.
The takeaway
Neither “hold everything” nor “give everything away” is inherently the right answer — and for most families, the right path lies somewhere between the two, informed by a clear-eyed view of the numbers rather than instinct alone. If you’ve never modelled your own retirement cash flow, that’s often a more useful starting point for Inheritance Tax planning than the tax itself.
