Pensions and inheritance tax: what changes in April 2027?

From 6 April 2027, most unused pension funds and pension death benefits will be included when calculating the value of an estate for inheritance tax. For families who expected their pension to pass on outside that calculation, this makes an estate planning review particularly useful.

The change applies to deaths on or after that date. It does not mean every pension will create an inheritance tax bill, but it can change the outcome when pension savings are considered alongside property and other assets.

What is changing for inherited pensions?

Many pension arrangements currently sit outside the estate for inheritance tax. Under the new rules, most unused pension funds and relevant death benefits will be brought into the calculation, even where the pension provider has discretion over who receives them.

The reform has been enacted in Finance Act 2026. Personal representatives will be responsible for reporting and paying the inheritance tax due, working with pension scheme administrators under the new arrangements.

Exceptions remain. These include qualifying death-in-service benefits from registered pension schemes and certain dependants' scheme pensions. Spouse, civil partner and charity exemptions also remain relevant, subject to the applicable conditions.

Why the whole estate needs reviewing

A pension should be assessed alongside the home, investments and other assets. Whether tax is payable depends on the available allowances, exemptions and the circumstances of the estate.

Signature Concierge's probate and estate planning services can help bring those issues together. A joined-up review is more useful than making a decision about one pension in isolation.

Inheritance tax is also separate from the income tax rules on pension death benefits. Beneficiaries may face income tax on inherited pension payments, depending on matters such as the member's age at death and the type of benefit. The new arrangements provide relief so that the amount used to meet inheritance tax on the pension is not itself also subject to income tax.

Keep nominations and your will aligned

Check the beneficiaries recorded on each pension's expression of wish form. These nominations help the provider understand your wishes, but their legal effect depends on the scheme's rules.

Including a pension in the inheritance tax calculation does not mean it will automatically pass under your will. The pension's beneficiary arrangements still need their own review.

Reviewing your will and wider legal arrangements alongside pension nominations helps identify gaps, particularly where family circumstances have changed.

Plan for retirement needs as well as inheritance

Before changing withdrawals or making gifts, consider the income you need for retirement, possible care costs and the tax consequences. Drawing money from a pension simply to reduce a future inheritance tax exposure can create other costs or leave you with less flexibility.

Gather current pension values, beneficiary details and a summary of your other assets. This gives your legal, tax and regulated financial advisers a clearer basis for reviewing suitable options.

Speak to Signature Concierge today to arrange an estate planning review with our partners and understand what the April 2027 changes could mean for your family.