Pensions and Inheritance Tax from April 2027

Written by Abigail Bird - 11.11.26

For many families, a pension has quietly been the most tax efficient thing they could leave behind. Unused pension savings could usually pass to loved ones free of inheritance tax, which is why many people have spent other savings first and left their pension untouched. From April 2027, that changes.

What is changing

For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will count as part of your estate for inheritance tax. They will be added to your home, savings and investments when working out whether tax is due. The Autumn Budget on 28 October 2026 left this change in place.

A few things stay the same. Death in service benefits paid by a registered pension scheme are excluded. Pension benefits passing to a surviving spouse or civil partner, or to a registered charity, keep the usual exemptions. If someone dies before 6 April 2027, the current rules apply, even if the pension is paid out after that date.

The practical burden also shifts. Your executors will be responsible for reporting and paying any inheritance tax due on your pension, alongside the rest of your estate.

Who it affects

Most estates will still have no inheritance tax to pay. The government estimates that in 2027 to 2028 around 10,500 estates will be liable to pay inheritance tax because of this change, and around 38,500 will pay more. For families with a home in London and a reasonable pension, this change can bring the estate over the threshold for the first time or make an existing bill larger.

There is a second layer to be aware of. If you die after age 75, your beneficiaries usually pay income tax on what they draw from an inherited pension. From April 2027, some pensions may face both inheritance tax and income tax.

Your pension and your Will need to agree

This is the point that catches people out. Your pension does not pass under your Will. It follows the nomination, sometimes called an expression of wish, that you have given your pension provider. Many people completed that form years ago and have not looked at it since.

If your Will says one thing and your nomination says another, your family can end up with an outcome you never intended, and now a tax bill your Will did not plan for. With pensions inside the estate, the two need to work together.

What to do now

Find your nomination forms for each pension and check who they name.
Check that your Will still reflects what you want, and how it sits alongside your pension.
Think about the order you draw on your savings and pension in retirement, with your financial adviser.
Look at whether lifetime giving or a trust would help your family, now that the pension may be taxed.

None of this needs to be done in a rush, but April 2027 is under five months away, and the earlier you look, the more choice you have.

“For years the advice was to leave your pension until last, because it sat outside your estate. That logic is changing, and many people have not yet caught up with it. The good news is that a short review now, of your Will, your pension nomination and your wider plans together, can make a real difference to what your family receives.”

Abigail Bird, Head of Legacy

How We Can Help

Our Legacy team can review your Will and your pension nominations together, explain where you stand in plain English, and put a clear plan in place. Where you need financial or tax advice as well, we work alongside your adviser, or introduce you to one we trust.