Pension inheritance tax changes: What high net worth families should be doing before April 2027

The Government’s decision to bring most unused pension funds and pension death benefits within the scope of inheritance tax (IHT) from 6 April 2027 represents one of the most significant changes to estate planning in recent years.

Recent HMRC clarification, including a technical note issued in May 2026, have provided greater clarity on how the new rules are expected to operate in practice.

However, many individuals and families are only now beginning to understand what these changes could mean for their wealth and succession planning.

For high net worth individuals in particular, this is the moment to review existing arrangements and consider whether their current estate planning remains fit for purpose, as Jo Summers, Head of Private Wealth & Tax at Jurit, explains.

What is changing with pensions and IHT?

From 6 April 2027, most unused pension funds and pension death benefits will be subject to IHT on the death of the pension member.

Historically, pensions have been one of the most tax‑efficient vehicles for passing wealth between generations. In addition to the income tax relief on making contributions to your pension, pension funds have not been subject to inheritance tax when the member died, making them an attractive option for preserving wealth for children and grandchildren.

That position is set to change.

Although pensions will continue to offer valuable retirement and investment benefits, the IHT treatment will become significantly less favourable for many families. Most “unused pension funds and pension death benefits” will be brought into the IHT calculation, with personal representatives responsible for reporting and paying any IHT due.

And, depending on the circumstances, beneficiaries could face both IHT on the value of the pension and income tax when they draw benefits, potentially reducing the value ultimately passed on. The precise income tax position will continue to depend on existing rules, including the age at which the member died and how benefits are taken.

**It is important to note that the new regime applies only to deaths on or after 6 April 2027. If the pension scheme member dies before that date, the current rules continue to apply, even if benefits are paid out later.**

Why does this matter for high net worth families?

Many estate plans have been built around the assumption that pension funds, particularly in defined contribution schemes, would remain outside the IHT net.

For some individuals, especially those with substantial pension pots, the changes could create a sizeable and unexpected IHT liability, potentially pushing estates above the available nil‑rate bands and into the 40% IHT charge on the excess.

The new rules are also likely to increase the administrative burden on executors and personal representatives, who will be responsible for:

• Identifying all relevant pension arrangements.
• Obtaining valuations of unused pension funds and death benefits.
• Reporting and paying any IHT due within the usual deadlines (typically six months from the end of the month of death).

For families with multiple pension arrangements, complex structures or significant wealth spread across different asset classes, this could make estate administration more complicated and may lead to delays if information is slow to emerge from pension providers.

“In practice, we expect this to slow estate administration down. Pensions are not always easy to identify, and getting consistent, timely information from different providers can be challenging. Even with the new mechanisms, there is a risk that executors are left managing multiple moving parts, with tax deadlines running ahead of the information they need.

Problems may also arise where the pensions have been nominated to go to people who are not beneficiaries of the estate.  In a worst case scenario, the estate could end up paying the IHT due on the pensions, so the pension beneficiaries receive their money tax-free.

“Measures such as allowing part of a pension to be withheld may help with cash flow, but they also risk delaying payments and creating uncertainty for beneficiaries, while leaving executors to make difficult decisions with incomplete information.

“The new rules may also deter people from investing in pensions given that, from April 2027, the changes introduce a huge amount of complexity with no IHT advantage. Despite the income tax relief for pension contributions, it may be far simpler for people to put their savings into Individual Savings Accounts (ISAs), for instance, which have always been subject to IHT but are part of the estate and dealt with in the usual way.”

What should people be thinking about now?

While April 2027 may seem some way off, effective estate planning takes time to design and implement, so it is important to consider the impact of this change now.

You should therefore think about:

• Reviewing the role of pensions
  How do pensions currently fit within your wider estate and succession strategy, and does that still make sense once they are within the IHT net? It’s vital to look at the overall picture of who you want your wealth to go to, so you don’t leave your family with a mess to sort out.
• Assessing potential IHT exposure
  Work with your advisers to model how including unused pension funds and death benefits in your estate might affect your overall IHT position from 6 April 2027 onwards.
• Re‑evaluating lifetime gifting strategies
  Consider whether making gifts during your lifetime (either from non‑pension assets or, where appropriate, by drawing on pensions) remains suitable and affordable, bearing in mind your own long‑term needs.
• Reviewing wills, trusts and succession plans
  Ensure wills, letters of wishes, family investment structures and trusts are aligned with the new rules and with your family’s objectives.
• Checking pension death benefit nominations
  Confirm that nominations (and any expression of wishes forms) are up to date, reflect your current intentions and are consistent with your broader estate plan.
• Modelling different scenarios for beneficiaries
  Explore how different combinations of IHT and income tax might affect how much your beneficiaries actually receive, and whether alternative structures or timing of withdrawals could improve outcomes.

Obviously, decisions should not be driven by tax alone. Pensions continue to offer valuable protections and benefits during an individual’s lifetime, including investment growth within a tax‑advantaged environment and, in many cases, creditor protection. So, any planning should balance tax efficiency with long‑term financial security and flexibility.

Don’t wait until 2027

The detail of the new regime is still being refined through secondary legislation and HMRC guidance, but pensions will no longer sit outside the IHT conversation.

And whilst the introduction of the new rules in April 2027 may feel like a distant event, it is important to plan for the change now.

Those who review their arrangements early will have more options available and more time to implement any changes carefully and thoughtfully, whether that involves restructuring assets, updating documentation or simply understanding the likely tax profile of their estate.

Starting the conversation now with your professional advisers can help ensure that your pension wealth supports both your retirement and your legacy in a way that remains aligned with your family’s goals.