UK pension inheritance process changes in April 2027
The treatment of pensions on death is changing. For deaths on or after 6 April 2027, most unused UK pension funds and pension death benefits will be included in the value of the deceased’s estate for Inheritance Tax purposes. Finance Act 2026 has put the reform into legislation.
This matters because many families have historically treated pensions as assets that sat largely outside the estate. A substantial SIPP or personal pension could therefore be left untouched while other investments were spent or gifted. That planning assumption needs to be revisited.
A will does not control every pension payment
Why? Because pension scheme rules and beneficiary nominations remain important. Nevertheless, the pension value may affect the tax calculation for the wider estate, the cash needed by personal representatives and the eventual amount inherited by different beneficiaries. A poorly coordinated will can therefore produce results that were never intended.
Schedule a review now
The review should cover the will, pension nominations, ownership of property and investments, available nil-rate bands, spouse or civil-partner exemptions, residence history and the likely liquidity of the estate. Families with assets in more than one country should also check whether separate wills are appropriate and, if so, whether they have been drafted so one does not revoke the other.
The right approach
The key point is not that everyone should rush to withdraw pension money before 2027. Taking money out can create income tax, investment and estate-planning consequences of its own. The right approach depends on age, spending needs, beneficiaries, residence and the composition of the overall estate.
The change is a reason to review planning, not a reason for panic.
If your circumstances involve more than one country, speak to an appropriately regulated adviser before changing a pension, investment or estate-planning arrangement.
