Pensions and Inheritance Tax – What are the changes from 6 April 2027?

Lifetime planning needs a rethink

These changes mean the traditional “pensions last” strategy may no longer be the most effective approach, and there will be a need to assess the pros & cons of balancing pension withdrawals, income tax, and IHT exposure, making it important to review retirement planning and estate planning together.

Who is likely to be affected?

• Defined contribution pensions, including SIPPs and workplace DC schemes.
• Many lump sum pension death benefits.
• Estates where pension wealth pushes the total value above IHT thresholds.

Key exceptions

The following key exceptions remain:

• Death-in-service benefits from registered pension schemes remain outside the scope.
• Spouse, civil partner and charity exemptions continue to apply.

More responsibility for executors

• Executors will need to identify pension assets.
• They will also need to report values and arrange payment of any IHT due to HMRC.
• Valuations and payment timings may create additional delays that will need to be carefully navigated.

Practical actions – What you can do now

• Review pension nominations, death benefits, and overall estate value.
• Check the IHT nil-rate band and residence nil-rate band impact.
• Consider lifetime gifting, available exemptions, ISAs, trusts, insurance, and wider estate planning options.
• Review your Will to make sure it still reflects your wishes.

What to do next

• Speak to your financial adviser, or let us introduce you to one, to review your current pension arrangements and linked death benefits.
• Review your estate and consider whether changes to your pension arrangements and linked death benefits need to be reflected within your Will.
• Consider whether there are additional steps that should be taken now to minimise the impact on your estate that the pension changes will have.

Planning ahead can make a real difference. If you have any questions about pensions, inheritance tax or estate planning, please get in touch with our Private Wealth team.