You may have arranged your pension on the understanding that it would pass to your family outside your estate. From 6 April 2027, that assumption may no longer be safe. If your pension nomination is out of date or your Will has not been reviewed for years, your family could face an unexpected Inheritance Tax bill, extra estate administration and difficult decisions at an already distressing time.
Think about the timing. In three months, you could still be relying on an old expression-of-wish form without checking whether it reflects your wishes today. In six months, the new rules will apply to deaths on or after 6 April 2027. And a year from now, families dealing with an estate may have to gather pension valuations and work out how the new rules affect the tax position. You have time to prepare, but it is worth using it.
What changes from 6 April 2027?
At present, many pension schemes pay death benefits at the discretion of their trustees or administrators. Because the pension may not be treated as part of the deceased person’s estate for Inheritance Tax purposes, pensions have often been used in estate planning to pass wealth to beneficiaries.
That broad position changes. HMRC says: “From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a deceased person’s estate for Inheritance Tax purposes.”
The change applies to deaths on or after 6 April 2027. If someone dies before then, the current rules apply even if their pension benefits are paid afterwards. The broad reform has been enacted in the Finance Act 2026; HMRC’s technical note on Inheritance Tax and pensions explains the approach and notes that further guidance is expected.
This does not mean every pension payment will automatically be taxed. The result depends on the pension, the beneficiary and the circumstances. Qualifying benefits for a surviving spouse or civil partner, and qualifying payments to a registered charity, may be exempt. Some other types of pension benefit are also treated differently. Take advice on your own arrangements rather than assuming an exception applies.
Who should pay particular attention?
You should review your plans if:
- You have a sizeable pension pot. Its value could materially affect the overall Inheritance Tax calculation.
- You are not married or in a civil partnership. An unmarried partner does not receive the spouse or civil-partner exemption simply because you have lived together for many years.
- Your pension is a major part of your wealth. Your family may need to consider how any tax due could be paid, particularly if other assets are tied up in property.
- You have made major life changes. A new relationship, separation, the birth of a child or the death of a person you nominated can make an old nomination unsuitable.
- You have not reviewed your Will for a long time. Your Will may have been written on the assumption that your pension would pass outside the estate.
Your pension nomination matters, but it may not bind the scheme
An expression-of-wish or beneficiary nomination form tells your pension scheme who you would like to receive your death benefits. It is important to keep it accurate and up to date, but it may not be a binding instruction.
HMRC explains that “most registered pension schemes operate on a discretionary basis”: trustees decide who receives the benefits, taking the member’s wishes into account alongside the scheme rules and relevant circumstances. Your nomination is guidance for that decision, not a guarantee of the outcome.
That distinction matters more under the new rules. An old nomination that once seemed like a minor administrative issue could leave trustees considering a choice you no longer intended. It could also affect the estate’s tax planning. Check the rules for each scheme and ask the provider how it treats nominations. A Will alone does not usually control benefits paid under a pension scheme.
Your Will and pension plan need to work together
A Will sets out what you want to happen to the assets it governs. Pension death benefits may be dealt with under separate scheme rules. From April 2027, pension value may still be relevant to Inheritance Tax even where it does not pass through your Will or form part of the estate being administered for probate.
That means a Will can be valid and clearly written but still produce an unintended overall result when considered alongside your pension arrangements. For example, the people receiving pension benefits may differ from those inheriting the assets controlled by your Will. That could affect both fairness between family members and the practical funds available to pay tax.
If you are researching how to make a Will in the UK, remember that planning is not just about deciding who receives your house or savings. Your wider estate (including pensions and how benefits are nominated) needs to be considered too.
What counts as your estate? It depends what you mean
There is an important difference between the assets that pass under your Will or through probate and the assets that are relevant to Inheritance Tax.
Pension benefits may be outside the ordinary probate process while still being included in the Inheritance Tax calculation under the new rules. Jointly owned property may pass automatically to the surviving owner, depending on how it is held. But that does not necessarily mean its value is ignored for Inheritance Tax. Life policies written in trust may also be treated differently from policies payable to the estate, although the details matter.
So, do not assume that “outside the estate” means “outside Inheritance Tax”. Ask for advice about the ownership, destination and tax treatment of each asset.
Practical steps to take before April 2027
You do not need to predict every possible tax outcome today. Start by getting a clear picture of what you have and what you want to happen.
- List your pension schemes. Include workplace and personal pensions, older arrangements and any pension annuities.
- Check your nominations. Confirm who is named, whether the information is current and what discretion the scheme retains.
- Find out roughly what your pensions are worth. You need not make a tax calculation yourself; the first step is knowing the scale of the assets.
- Review your Will and wider estate plan. Check that your executors, beneficiaries and distribution plans still reflect your wishes.
- Get tailored advice before the change takes effect. A probate solicitor or private client solicitor can help you consider how your Will, pension nominations and other assets fit together.
- Keep the plan under review. Revisit it after significant family or financial changes, and check it again before April 2027.
When someone dies, personal representatives, the people responsible for administering the estate, will need to identify pension arrangements and obtain relevant information. HMRC’s technical note says they will be responsible for reporting and paying any Inheritance Tax due on pension property covered by the rules. Good records and clear instructions can help reduce the burden on your family.
A chance to plan, not a reason to panic
The rules are changing, but you have a deadline you can act on. Reviewing your nominations and Will now may help prevent confusion, an unintended distribution or avoidable pressure on loved ones later. The right plan depends on your family, your pensions and the scheme rules; there is no one-size-fits-all answer.
At Tyto Law, we can help you review your Will and estate plan, ask the right questions about your circumstances and explain your options in plain English. We support clients from our offices in Lincoln and Crowle, North Lincolnshire, and can discuss arrangements that suit you. Our Will writing services are designed around your wishes and the people you want to protect.
The value of a review is clarity: a clearer picture of your assets, a Will that reflects your current intentions and practical next steps for your family. If you would like to talk it through, contact us to arrange a conversation. The initial consultation costs a fixed fee of £175. This fee does not apply to Wills, Lasting Powers of Attorney or Probate.
This article provides general information, not individual legal or tax advice. The treatment of pension benefits depends on the scheme and your circumstances. Rules and guidance may develop before April 2027.
About the author
Oliver Saxon, Principal Solicitor, qualified as a solicitor in 2012 and established Tyto Law Solicitors in 2018. Oliver and the team support individuals with Wills, estate planning and probate matters, with a practical, client-focused approach. Read more about Oliver.
Category: Wills & Probate