Pensions and inheritance tax After April 2027
For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will be brought into the estate for inheritance tax. For estates above the available allowances, the impact could be substantial.
What is actually changing?
Finance Act 2026 brings most unused pension funds and pension death benefits within the scope of inheritance tax for deaths on or after 6 April 2027.
Before April 2027
- Pension sits entirely outside the estate
- The default approach: preserve pensions, spend other assets first
- inheritance tax planning focuses on property, ISAs and investments
- Pension nomination treated as a separate, standalone task
After April 2027
- Pension may become the single largest taxable asset in the estate
- Different withdrawal patterns can affect the estate projection
- Pension, property and will questions should be reviewed together
- Regulated pension decisions stay with an FCA-authorised adviser
This is not simply "more inheritance tax to pay". Pension values, will design, property ownership and allowances interact, while regulated pension decisions remain with an FCA-authorised adviser.
Who does this affect?
Not everyone will be significantly affected. But for those who are, the time to act is now.
Pension accumulators aged 45 to 65
A pension pot of £500k or more alongside property and savings will often push the estate above the nil rate band thresholds.
Those already in drawdown
An estate review can show what changed. An FCA-authorised adviser decides whether drawdown remains suitable.
Blended families and second marriages
Pension nominations, will trusts and competing family interests need to work together. The reform adds another layer of complexity.
Business owners with pension funding
Large pension pots combined with business assets, property and other wealth can create substantial inheritance tax exposure.
Couples with large primary residences
Adding a large pension pot to the estate can push the total above the RNRB taper threshold and erode a valuable relief.
Anyone whose will predates 2024
If the will was drafted before the pension reform was announced, it almost certainly does not account for the new rules.
The five areas every estate plan needs to address
Each area builds on the last. Missing one creates a gap that undermines the rest.
Map the full estate picture
You cannot plan what you cannot see. Start by getting everything in one place.
For many people, the pension will now be the largest single taxable asset. That changes everything.
Take drawdown questions to your adviser
Different withdrawals change the estate model, but retirement suitability comes first.
Repton identifies the estate question. An FCA-authorised adviser recommends any pension action.
Review the will and trust structure
Most wills were written before the pension reform. Many are now working against the family.
A will that was perfectly sensible three years ago may now be the weakest point in the entire plan.
Check pension-provider records
Review the nomination and will together, without treating the pension as a legal document.
Repton coordinates the estate question; the provider and FCA-authorised adviser handle pension decisions.
Review how property is owned
How a property is owned directly affects inheritance tax exposure, what passes through the will and whether the RNRB is protected.
Often one of the highest-value changes in the entire plan and one of the simplest to put in place.
Case study: how this looks in practice
Educational modelling only. Names and figures are illustrative. This is not financial or legal advice.
The Situation
Names
David & Sarah
Ages
54 and 51
Family
Married, 2 children
DC Pension
£720,000
Main Residence
£850,000
ISA / Savings
£180,000
Position Before Review
- Pension outside estate, taxable estate c.£1.03m
- Illustrative second-death inheritance tax c.£12,000 on the £30,000 above £1m combined allowances
- Will from 2019, property held as joint tenants
- Pension nominated entirely to Sarah, not reviewed since
After April 2027 Without Planning
- Pension added to estate, total estate now c.£1.75m
- Illustrative additional second-death inheritance tax c.£288,000 on the £720,000 pension at 40%, assuming full combined allowances of £1m
- 2019 will does not account for the pension being taxable
- Joint tenancy passes the home to Sarah automatically, so David's will cannot direct his half-share
Illustration only, using 2026/27 allowances and a 40% rate on the second death, assuming the home passes to direct descendants and full transferable allowances are available. This compares total tax of c.£12,000 without the pension with c.£300,000 including it. A pension passing to a qualifying spouse or civil partner is normally exempt on first death; the £288,000 is not a tax charge on David's nomination to Sarah. Actual liability depends on ownership, beneficiaries, the residence allowance taper and the pension provider's treatment.
What Was Put in Place
Property ownership changed to tenants in common
Wills redrafted with life interest trust on first death
Provider nomination reviewed with an FCA-authorised adviser
Asset sequencing agreed by the FCA-authorised adviser
Lasting Powers of Attorney completed for both
The Outcomes
Estate options modelled
across will structure, property ownership and allowances
Clear drawdown sequencing questions identified
so the IFA can model options with the client before decisions are locked in
Survivor objectives recorded
for the responsible solicitor to reflect in the legal drafting
Professional briefs aligned
across the estate planner, solicitor and FCA-authorised adviser
Trade-offs made clear
before any legal or regulated change is made
Strategy documented for the file
written summary shared with the family's financial adviser
Warning signs that a review is overdue
Any one of these should prompt a conversation. If more than one applies, the review should not be delayed.
Pension pot value equals or exceeds the property value
Pension nomination not reviewed in the last three years
Second marriage, particularly with children from a previous relationship
Business owner without a business lasting power of attorney
Pension or life cover with no up-to-date expression of wishes (qualifying death-in-service benefits from registered pension schemes are excluded from the 2027 change)
Estate above £2m where the residence nil rate band tapers
Property held as joint tenants where tenants in common would be more efficient
No will, or a will that predates the birth of children or grandchildren
Common questions
Estate planning with financial planning depth
Advanced CII financial planning qualifications, we understand the whole picture, not just the legal documents.
Professional indemnity in place
Full cover. We hold ourselves to the same professional standards you would expect from any regulated firm.
Fixed, transparent pricing
You know the cost before committing. No hourly rates, no unexpected invoices.
Financial advisers, solicitors and accountants
If you work with clients who may be affected by these changes, we have a dedicated page covering how we collaborate with professional advisers.
Working with ProfessionalsNot sure where your estate stands?
Book a free 15-minute call to talk through your situation.
No obligation, no jargon. Just a straightforward conversation about what your estate looks like now, what changes after April 2027 and whether anything needs to be done.
This page is educational, not a personal recommendation. Repton is not FCA-authorised and does not recommend investments, pensions or insurance. An FCA-authorised adviser must assess any regulated decision. Legal work remains with the appropriate solicitor.
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