The 2027 Change
What is changing from April 2027?
At present, many pension arrangements sit outside the estate for inheritance tax purposes. This has often made pensions an important part of later-life and estate planning.
From 6 April 2027, the position is changing. Most unused pension funds and pension death benefits will be brought into the value of the estate for inheritance tax purposes.
This does not mean every pension will automatically create an inheritance tax bill. The final tax position will depend on the value of the estate, available allowances, who receives the benefits and the individual circumstances.
For a deeper overview, read our full guide to pensions and inheritance tax from 2027.
Pensions That May Be Affected
Which pension funds may be affected?
The change is mainly relevant where pension wealth remains unused at death. This may include defined contribution pension pots, pension funds held in drawdown and certain lump sum death benefits.
For clients who have deliberately preserved pension funds as part of estate planning, the 2027 change may mean the existing strategy needs to be reviewed.
- Defined contribution pension pots
- Unused pension funds at death
- Pension funds held in drawdown
- Pension death benefits
- Beneficiary nomination forms
- Retirement income planning strategy
This is why pension decisions should be reviewed alongside pension drawdown advice and wider pension and retirement planning.
Family Wealth Planning
Why this matters for retirement and estate planning
For years, some clients have treated pensions differently from other assets because pension funds often sat outside the estate for inheritance tax purposes.
The 2027 change means that approach may need to be reviewed. It may affect how clients think about pension withdrawals, ISA and investment use, gifting, family wealth transfer and the balance between retirement income and estate planning.
The answer is not simply to withdraw money from pensions before 2027. Withdrawals can create income tax, investment, cash flow and long-term security issues. The right approach depends on the full financial plan.
EWS can help clients review these questions alongside inheritance tax planning, retirement income planning and wider family wealth decisions.
Exclusions And Detail
What appears to be excluded?
The government has confirmed that some benefits are expected to remain outside the new inheritance tax treatment. This includes death-in-service benefits payable from a registered pension scheme and dependant’s scheme pensions from defined benefit or collective money purchase arrangements.
Because pension rules, scheme features and death benefit options can vary, clients should avoid assuming that all benefits will be treated in the same way.
A proper review should look at the type of pension, death benefit options, beneficiary nominations, scheme rules and how each pension fits into the wider estate.
Planning Review
What should families review before 2027?
The 2027 pension inheritance tax change does not mean everyone should take the same action. It does mean that existing planning should be reviewed carefully before decisions are made.
Pension values and death benefits
Understand what pension arrangements exist, how they are structured and what may be payable on death.
Beneficiary nominations
Check whether pension nominations remain suitable and whether they reflect current family circumstances.
Wills and estate planning
Review how pensions, property, investments and other assets may interact with the estate.
Drawdown and withdrawals
Consider whether retirement income strategy needs to change, without creating unnecessary tax or cash flow issues.
ISA and investment structure
Look at how pensions, ISAs and investment portfolios should work together in later-life planning.
Family wealth planning
Consider gifting, succession planning and how wealth may pass to the next generation.
Related Guides
Related EWS planning guides
The pension inheritance tax change should not be reviewed in isolation. These related guides explain the wider planning areas that may need to be considered.
Common Questions
FAQs about pensions and inheritance tax from 2027
Will pensions be subject to inheritance tax from 2027?
From 6 April 2027, most unused pension funds and pension death benefits are expected to be included within the value of a person’s estate for inheritance tax purposes.
Does this mean every pension will be taxed?
No. Whether inheritance tax is due will depend on the value of the estate, available allowances, who receives the benefits and the individual circumstances.
Which pensions may be affected?
The change is mainly relevant to unused pension funds and certain pension death benefits, particularly where pension wealth remains unused at death.
Are death-in-service benefits included?
The government has confirmed that death-in-service benefits payable from a registered pension scheme are expected to remain outside the new inheritance tax treatment.
Should I withdraw money from my pension before 2027?
Not without advice. Pension withdrawals can create income tax, investment, cash flow and long-term retirement planning issues. The right approach depends on the full financial plan.
Should pensions and wills be reviewed together?
Yes. The 2027 change means pensions, wills, beneficiary nominations, estate planning and family wealth decisions may need to be reviewed together.
Speak To EWS
Review your pension and estate planning before 2027
The 2027 pension inheritance tax change may affect how pensions, retirement income, wills, estate planning and family wealth should be reviewed. EWS can help you understand the full picture before decisions are made.
