The Five Year Run Up to Retirement: What HNW Clients Should Be Doing Before They Stop Earning

For most HNW clients, the five years immediately before retirement is structurally the most valuable planning window of their lives. The decisions made in this period such as final decade pension contributions, drawdown architecture design, IHT planning ahead of the April 2027 changes, succession framing compound for the remaining 25 to 40 years. Most clients arrive at retirement having not used this window properly. That is usually where the biggest opportunity sits.

The phrase "financial advice for retirement" is usually framed as something you receive once retirement begins, a conversation about how to manage the money you already have. For most HNW clients, this framing is wrong. The most consequential planning decisions are made in the five years before retirement, not the years after. By the time the first withdrawal is made, a number of the highest value structural decisions are no longer available.

This article is a practical guide to what those decisions are and when they need to be addressed.

Why the 5 year run up window matters

Three structural reasons.

First, the pension architecture that determines your tax efficiency in retirement is mostly determined by what you put in during the final accumulation phase. Carry forward allowances reset annually, the s21 IHTA gifts out of normal expenditure exemption rewards regular discipline established before retirement begins; the structural decision around what assets sit in pension vs ISA vs GIA is set largely by what you contribute in the final decade of earning.

Second, the post-April 2027 IHT on pensions change has materially shifted the calculus. For clients with significant pension wealth, the architecture designed before the 2027 announcement is almost certainly suboptimal under the new regime. The 5 year run-up is the natural window to rebuild, before retirement begins, while income remains high enough to absorb structural changes, and before the first drawdown commits the architecture.

Third, the decisions that need lead time to be effective, Family Investment Companies, trusts, lifetime gifting against the seven year clock, all need to be in place before retirement begins to fully compound through it. A FIC established at 65 produces a different outcome from one established at 60. The 5 year window is when the lead time sensitive planning happens.

The pension contribution acceleration question

For HNW clients in the 5 years before retirement, pension contribution capacity is often substantially higher than the contribution actually being made. Three structural levers worth checking.

The Annual Allowance plus carry forward

The standard Annual Allowance is £60,000, plus up to three years of unused carry forward. For HNW clients whose Annual Allowance has been tapered for several years, the carry forward pool can be £150,000 or more, accumulated unused capacity that can be deployed in a single tax year against a bonus, vesting tranche, or high earnings year. I covered this in my Pension Planning for Executives and Business Owners piece. The 5 year run up is the natural window to deploy carry forward against the final highest-earning years.

The threshold income gateway at £200,000

The taper only applies if both adjusted income exceeds £260,000 and threshold income exceeds £200,000. The taper reduces the allowance by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000. Salary sacrifice arrangements can pull threshold income below £200,000 even where adjusted income exceeds the threshold, switching the taper off entirely. For executives in the final years before retirement, this is one of the highest value structural conversations available.

Employer pension contributions for business owners

For directors of owner managed businesses, employer contributions are typically deductible for corporation tax (25% saving in the main rate band), attract no employer NI, and build personal wealth outside the business in a tax efficient wrapper. Across the 5 year window, £60,000 a year of employer contributions produces approximately £400,000 of net effect on the family balance sheet, outside the business, ready for retirement.

The drawdown architecture design: Decisions before the first withdrawal

Once retirement begins and the first withdrawal is made, the structural architecture is largely set. The decisions to make beforehand:

Which pots will be drawn first, and which last, under the post-April 2027 IHT regime? The conventional sequence (GIA first, ISA second, pension last) was structurally correct when pensions sat outside the IHT estate. From April 2027, that assumption no longer holds (when most unused DC pensions will be brought into the estate for IHT). Personal representatives will be liable for reporting and paying any IHT due on those pension funds. For clients with significant pension wealth, the case for drawing pension earlier in retirement is materially stronger than it was twelve months ago. I covered this in detail in "The Order You Draw Different Pots Matters More Than You Think".

What proportion of pension capital should be converted to a guaranteed income stream? Partial annuitisation against the slice of capital that funds non-discretionary spending is usually the right structural answer for HNW clients with significant pension wealth. The April 2027 IHT changes strengthen the case rather than weakening it. Covered in detail in "Annuities Are Worth Looking At Again".

What is the right cash buffer? Most HNW retirement plans benefit from 18 to 36 months of essential spending held in cash, providing a behavioural buffer against market drawdowns where drawing from invested wrappers is unattractive.

What is the right ongoing review cadence? The post-2027 regime makes the planning more dynamic than it was. Annual reviews with explicit IHT regime monitoring are now structurally important.

The IHT planning revisit ahead of April 2027

The 6 April 2026 BPR reform took effect approximately one month before this article was written. The April 2027 inclusion of unused DC pensions in the IHT estate is twelve months ahead. For HNW clients with significant pension wealth and inherited family business interests, the planning environment has moved substantially since most existing plans were designed.

The 5 year window before retirement is the natural moment to revisit:

The BPR qualifying assets in the family balance sheet, particularly AIM shares, EIS holdings, and qualifying business interests: The post-2026 position is materially different from the pre-reform position. AIM shares now receive 50% relief from the first £1 of value, and qualifying property above £2.5m receives 50% relief rather than 100%. The £2.5m allowance is transferable between spouses, so a surviving spouse can pass on up to £5m of qualifying assets tax-free, on top of existing nil-rate bands.

The pension architecture against the post-2027 regime: The strategy designed when pensions sat outside the IHT estate may no longer be the right answer. For clients with pension wealth above £500,000, the architecture needs explicit review.

Lifetime gifting and the gifts out of normal expenditure exemption: For clients whose pension and investment income will exceed their spending needs in retirement, the s21 IHTA exemption can absorb substantial annual gifting without IHT consequence, but the exemption requires regularity and discipline, ideally established before retirement begins.

Trust and FIC structures. Both need lead time to be effective. A FIC established in the final pre-retirement year produces a different outcome from one established 5 years out. I covered the IHT framework in detail in "How to Minimise Inheritance Tax in the UK".

The succession planning strategy

The 5 year run up is also when most HNW clients should start having the genuine succession planning conversations. Not "writing a will", that should already be in place, but the deeper conversations about what wealth should pass to whom, in what form, with what conditions, and on what timeline.

For most HNW families, the highest value succession planning happens in life, not at death. Lifetime gifting under the seven year clock such as educational support for grandchildren, property purchase assistance for children and capital for genuine entrepreneurial ventures. Trust structures established with sufficient lead time to compound through retirement.

The 5 year window before retirement is when these conversations need to start, partly because they need lead time, partly because the family structure is most legible at this stage, and partly because the cognitive bandwidth to do this work is greater in the run up than once the retirement transition is underway.

The investment architecture question

Most generic retirement planning advice leans heavily into the "growth → protection" glide path: equities while working, gradually shifting to bonds as retirement approaches.

For HNW clients with assets that exceed lifetime spending requirements, this framing is often wrong. The relevant time horizon for the residual capital, the portion that will pass to the next generation rather than be spent in lifetime is multi decade. Reducing equity exposure on the residual to "protect capital" foregoes meaningful real return growth across the longer horizon. I covered the liability matching framework in detail in "Retirement Planning When You Already Have Enough".

The 5 year window is when the portfolio architecture should be designed against the actual planning purpose, typically with one portion calibrated for essential spending predictability, and a separate portion calibrated for the multi decade succession horizon.

The lifestyle calibration exercise

The 5 year window is also when the "what will retirement actually look like" question needs to be answered. Not the abstract version ("more time with family, travel, hobbies") but the specific version, such as how many days a week will you work or not work, where will you spend most of your time, what does your annual spending need to look like, what one off expenditures are likely in the first 5 to 10 years.

This is partly a financial planning exercise (it produces the income calibration the rest of the planning is built against) and partly a psychological one. Many HNW clients underestimate how much identity transition is involved in moving from senior career to retirement. The 5 year window is when this transition can be done deliberately rather than abruptly.

What this means in practice

If you are reading this because you are within 5 years of planned retirement, three structural questions are worth working through:

Has your pension contribution strategy been optimised for the final accumulation window? Annual Allowance and carry forward against final highest earning years, threshold income gateway management, employer contributions for business owners. The 5 year window is when the contribution architecture either works hard for you or doesn't.

Has your drawdown architecture been designed against the post-April 2027 IHT regime? For most HNW clients with significant pension wealth, the strategy designed before the announcement is almost certainly suboptimal. The pre-retirement window is when this can be rebuilt.

Has the lead time sensitive IHT and succession planning been started? FICs, trusts, lifetime gifting against the seven year clock, the s21 exemption discipline, all need lead time to be fully effective. The 5 year window is when the foundations are laid.

The strongest planning relationships are the ones where these conversations are raised proactively, which is five years before retirement, not five months. Most clients arrive at retirement wishing they had started the conversation earlier.