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The rules around pensions and Inheritance Tax (IHT) change from 6 April 2027. That may sound unsettling, but it doesn’t mean your plans are wrong. It’s a good time to check they still fit.
Why this matters
There’s been a lot of talk about the planned pension and IHT changes. If you’ve built up a pension over many years, you may be asking a simple question: what could this mean for my family?
The good news: this isn’t a reason to panic. It’s a reason to pause, review your plans and check your wealth is arranged the right way for your family.
The key point: the rules may be changing, but your goals don’t have to. With the right advice, you can make clear, confident choices.
Today, many defined contribution pensions – such as personal pensions and SIPPs – can sit outside your estate for IHT. That’s made them a useful way to pass on wealth.
From 6 April 2027, the government plans to bring most unused pension funds and pension death benefits into the value of a person’s estate for Inheritance Tax. This applies to deaths on or after that date.1
So, some families could face a higher Inheritance Tax bill than expected. People who thought their estate was below the threshold may need to look again.
You can also read our detailed explanation of how unspent pensions are expected to be treated for Inheritance Tax from April 2027
Pensions still play a valuable role in retirement planning. They help fund later life, offer tax relief on contributions, and can still grow in a tax-efficient way.
Spouse and civil partner exemptions are also expected to remain, and existing Inheritance Tax principles for death benefits passing to a surviving spouse or civil partner will be maintained. Death-in-service benefits from a registered pension scheme should also stay outside this change.1
There also remains the provision that if you die before age 75, the benefits can be paid free from income tax2. So, if left to your spouse and you die before 75, the pension value will pass to your spouse free from IHT and drawdown will be income tax free.
So, pensions aren’t suddenly “bad” – but their estate-planning role may look different from April 2027.
Not everyone is affected the same way. A review may be worth considering if you:
- have a large defined contribution pension
- own property as well as pension wealth
- have ISA or investment portfolios
- want to leave money to children or grandchildren
- have an estate that may be close to IHT thresholds
- haven’t reviewed your estate plan, will or pension beneficiaries recently
This doesn’t mean you’ll definitely pay more tax. It means the new rules may be relevant to you, so it’s sensible to check.
The numbers that matter
£325k
standard nil-rate band³
£175k
residence nil-rate band³
£2m
where the residence band tapers⁴
6/4/27
when the change applies¹
For many, the main question is no longer just “How much is in my pension?” It’s also:
“Am I still holding the right assets in the right places?”
- In the past, some people spent taxable investments first and left pensions untouched. That made sense when pensions sat outside the estate for Inheritance Tax.
- From April 2027, that may not suit every family. Some may need to review the order they use their assets. Others may need to update wills, pension nominations or gifting plans.
Our guide to Inheritance Tax and estate planning explores some of the wider considerations.
One of the biggest risks is assuming an old plan will keep working after the rules change.
A review with your adviser can answer practical questions, such as:
- what your estate may look like after April 2027
- whether your pension nominations are up to date
- whether your will still supports your wishes
- how you may want to draw income in retirement
- whether gifting, protection or other planning options may be suitable. Your adviser may also discuss whether whole-of-life assurance could help provide money for a future Inheritance Tax bill.
- how your family could be affected if you died before or after age 75
Good planning looks at the whole picture, not a quick rule of thumb.
What’s the role of whole-of-life assurance and Inheritance Tax (IHT)?
Imagine a couple with a family home, savings, investments and a large pension. Under current rules, the pension may sit outside their estate for IHT. From April 2027, it may be included.
That could push the estate above important thresholds. The standard nil-rate band for Inheritance Tax is £325,000. The residence nil-rate band is £175,000. These nil-rate bands can be transferred between spouses or civil partners in some cases, potentially providing a combined tax-free allowance of up to £1m for a married couple.3
The problem is that the residence nil-rate band can be reduced where an estate is worth more than £2 million.4 If pension wealth is now counted, some families may cross that line for the first time – losing the full combined £1m allowance without further planning.
There’s no standard answer here, but it shows why a review can be so valuable.
See another illustration of why the change may make an Inheritance Tax financial check worth considering.
Worried about inheritance tax? Then it’s time for a financial check
Five things you can do now
You don’t need to rush, but you can take useful steps.
These steps won’t replace personal advice, but they’ll make your next adviser meeting more focused.
It may also be helpful to consider whether your pension is still fit for purpose, both for your retirement and for the people you hope to leave money to.
1
List your pensions and keep the details somewhere safe.
2
Check who you’ve nominated to receive your pension benefits.
3
Review your will so it still reflects your wishes.
4
Talk to your adviser about how you take income in retirement.
5
Think about whether your family knows where key documents are kept.
Your plans may need adjusting. That doesn’t mean they’re broken
Tax rules change. Family needs change too. What matters is that your plan keeps up.
The April 2027 changes are important, but they don’t remove the value of pensions. For many people, pensions will stay a key part of retirement planning. The change is more about how pension wealth is passed on, and whether your estate plan still works.
If passing on wealth matters to you, now is a good time to understand what the change could mean. A calm review today helps you make better decisions for tomorrow.
If you’d like to understand how the proposed pension and Inheritance Tax changes could affect your family, please speak to your Partners Wealth Management adviser.
Important information
Tax treatment depends on your individual circumstances and may change in future. Inheritance Tax and pension rules are complex, and the proposed changes from 6 April 2027 may be updated before they take effect. This article is for general information only and isn’t personal financial or tax advice. If you’d like to understand what these changes could mean for you, please speak to your financial adviser and, where needed, a qualified tax specialist.
Sources
1 HM Revenue & Customs, GOV.UK, published 26 November 2025.
Inheritance Tax — unused pension funds and death benefits
2 HM Revenue & Customs, “Tax on a private pension you inherit”, GOV.UK.
Tax on a private pension you inherit
3 HM Revenue & Customs, GOV.UK, updated 6 April 2026.
Inheritance Tax thresholds and interest rates
4 HM Revenue & Customs, GOV.UK.
Work out and apply the residence nil rate band for Inheritance Tax