Inheritance Tax on Pensions 2027: What Families Need to Know

In Short: From 6 April 2027, most unused pension funds will count towards a person's estate for inheritance tax for the first time. Not every family will pay more tax -- transfers to a surviving spouse or civil partner, charities and death-in-service benefits remain exempt. But the administrative burden falls on executors regardless of whether tax is ultimately owed.

Why Are Pensions and Inheritance Tax Changing?

For many people, unused pension funds have historically sat outside the estate for inheritance tax purposes. That treatment made pensions valuable not only for retirement income but also for estate planning. Some people drew on savings, investments or property first and left pension funds untouched, because unused pension wealth could often be passed on more tax efficiently than other assets.

The government is changing that treatment from April 2027. HMRC's stated policy objective is to reduce the use of pensions as a wealth-transfer vehicle and bring more consistency to the inheritance tax treatment of different types of pension arrangements.

Finance Act 2026 received Royal Assent on 18 March 2026. The core framework is now law for deaths on or after 6 April 2027. Some procedural details -- including final guidance, templates, information-sharing regulations and HMRC online tools -- are still being developed and are expected to be published ahead of implementation.

What Is Changing From 6 April 2027?

From 6 April 2027, most unused pension funds and pension death benefits will be counted as part of a person's estate for inheritance tax. An unused pension fund is pension savings that have not yet been drawn down as retirement income or converted to an annuity -- including any balance remaining in the pot at death, whether the member had started taking withdrawals or not.

Whether tax is actually owed depends on the total estate value against the available nil-rate bands -- £325,000 for individuals in the 2026 to 2027 tax year, frozen until 2031, rising to up to £1,000,000 for couples leaving a home to direct descendants.

The change mainly affects defined contribution pensions -- personal pensions, SIPPs and workplace defined contribution schemes. Some pension death benefits from defined benefit schemes may also be in scope depending on their nature. The glossary at the bottom of this page defines key pension terms.

The change applies to deaths on or after 6 April 2027. Executors should not assume pensions can be ignored for estate reporting after that date.

A note on post-75 deaths: For anyone who dies aged 75 or over, there is an additional consideration. The pension is subject to inheritance tax as part of the estate, and beneficiaries also pay income tax at their own marginal rate on what they withdraw. HMRC has introduced a credit mechanism to prevent literal triple taxation, but the combined effective rate can be significant for higher-rate taxpayers. This makes pension planning and beneficiary nominations particularly important for those approaching or past 75.

Will All Pensions Be Subject To Inheritance Tax?

No. The change mainly affects defined contribution pensions where a balance exists and may be passed on after death. Several types of pension benefit are excluded or remain exempt.

What Is Excluded or Exempt

Spousal and civil partner transfers: death benefits paid to a surviving spouse or civil partner remain exempt from inheritance tax, subject to the usual rules. This exemption applies only to legally married couples and those in a registered civil partnership. Cohabiting partners who are not married or in a civil partnership do not qualify for the spousal exemption, regardless of how long they have lived together.
Charitable gifts: charity lump sum death benefits and pension benefits passing to qualifying charities also remain exempt.
Death-in-service lump sums: benefits from registered pension schemes remain outside the new inheritance tax treatment. Many people assume workplace life cover is the same as a pension pot. It is not always the same, and the exact nature of the benefit matters.
Dependants' pensions from defined benefit schemes: pensions paid as ongoing income to a dependant -- such as a spouse continuing to receive a percentage of the member's pension -- are excluded. Most defined benefit schemes pay a survivor's pension rather than a transferable lump sum, which means most defined benefit members will not be directly affected.
Joint life annuities: pension annuities that continue to a survivor after the member's death, purchased together with the member's own lifetime annuity, are also outside the new rules.

What May Still Be Included From Defined Benefit Schemes

Some lump sum benefits from defined benefit schemes may still be counted in the estate, such as a return of contributions on early death or payments continuing under a guarantee period. These are not automatically exempt simply because they come from a defined benefit scheme. The scheme administrator should be asked whether any lump sum benefit exists, what its value is, whether it needs to be reported to HMRC, and what documentation is required.

It is worth noting that even where no tax is ultimately due, executors may still need to report some pension benefits to HMRC. Exemption from tax is not the same as exemption from the reporting obligation.

Who Is Most Likely To Be Affected?

This change does not mean every estate will suddenly owe inheritance tax. Most estates will continue to have no inheritance tax liability.

The government has estimated that, of around 213,000 estates with inheritable pension wealth in 2027 to 2028, around 10,500 estates will become liable for inheritance tax where they would not previously have been. Around 38,500 estates are expected to pay more inheritance tax than they otherwise would have. Where an estate is affected, HMRC estimates the average additional inheritance tax liability will be around £34,000.

The families most likely to be directly affected are those where someone dies with unused pension wealth and an estate already close to or above the inheritance tax threshold. This may include people with several workplace pensions, a large defined contribution pension, a SIPP, drawdown funds, significant property wealth, or beneficiaries other than a spouse or civil partner.

The standard inheritance tax threshold for the 2026 to 2027 tax year is £325,000 and is frozen until 2031. The residence nil-rate band can increase the available threshold where a home is left to direct descendants, and married couples or civil partners may be able to transfer unused thresholds.

Even where no inheritance tax is due, executors may still need to identify pension providers, request valuations, understand exemptions, keep records and show that reasonable steps were taken. A pension does not need to be large to create a problem -- even a modest old workplace pension can delay estate administration if nobody knows where it is held.

Why the Burden Falls on Executors, Not Pension Providers

This is the part of the change that matters most for families.

The government originally consulted on a model where pension scheme administrators would be responsible for reporting and paying inheritance tax on the pension element of an estate. That model was not adopted.

Instead, personal representatives will generally be responsible for reporting and paying any inheritance tax due on unused pension funds and pension death benefits. In practice, this means the executor may need to locate every pension the deceased held, ask each provider for a date-of-death valuation, combine those figures with the rest of the estate, work out whether tax is due, and report everything to HMRC.

The challenge is that neither side starts with the full picture. Pension providers know the pension value but not the house, savings, investments, debts or other assets that make up the estate. Executors are responsible for the estate but may not know which pensions exist, or even that some arrangements were ever made.

Bridging that gap falls entirely on the executor. They may become responsible for tax reporting on pension assets they do not control, may not have direct access to, and may not even know about at the start.

What This Means If You Are an Executor

If you are an executor or personal representative after April 2027, pensions will need to be treated as part of the estate-administration checklist.

You will need to identify every pension the deceased held -- current workplace pensions, old workplace pensions, personal pensions, SIPPs and drawdown arrangements. There is no single public tool that guarantees a complete list. The government's Pension Tracing Service can help locate old workplace pensions, and Gretel is a free unclaimed assets search that covers pensions alongside other financial accounts.

You will need to contact each provider and ask what benefits exist on death, whether a value must be reported for inheritance tax purposes, whether any benefits are excluded, who the nominated beneficiaries are, and what evidence the provider requires.

HMRC's technical note sets out the expected information-sharing process between pension providers and personal representatives. HMRC intends to provide online tools and guidance, including an inheritance tax checker tool, ahead of April 2027 to support this process.

You then need to combine the pension information with the rest of the estate -- bank accounts, property, investments, insurance, gifts, debts, business interests and other assets.

Any inheritance tax due must normally be paid by the end of the sixth month after death. HMRC charges interest at its current late payment rate if it is not paid by the due date. Late filing penalties may also apply if required information is not submitted on time.

For a practical guide to locating old pensions, read: How to Find Lost Pensions in the UK.

The Liquidity Problem Executors Need to Understand

There is a practical cash-flow issue built into these rules. Pension funds are not usually controlled by the executor in the same way as estate bank accounts. The money sits with the pension scheme until benefits are paid to beneficiaries or otherwise dealt with under the scheme rules. But the personal representative may still be responsible for reporting and paying inheritance tax due on the estate, including relevant pension value.

The government has created two mechanisms to help. First, a withholding notice allows the executor to instruct a pension scheme administrator to hold back up to 50% of a beneficiary's benefit entitlement while the tax position is finalised, for up to 15 months from the date of death. Second, a pensions direct payment mechanism allows inheritance tax and interest due on pension value to be paid directly from a registered pension scheme to HMRC where the rules are met.

These mechanisms are helpful, but they do not remove the underlying challenge. The executor still needs to know which pensions exist, obtain values, understand who is receiving what, and coordinate the process.

If the estate may need cash to pay tax, identifying bank accounts early is also important. See: How to Find Bank Accounts After Someone Passes Away.

Why the Pensions Dashboard Will Not Solve Everything

The Pensions Dashboard should help over time, but it should not be treated as a complete solution for executors. Schemes and providers in scope are required to connect to the pensions dashboards ecosystem by 31 October 2026. That is not the same as saying every executor will have a complete search tool available from April 2027.

Even once dashboards are fully available to the public, they are designed primarily to help individuals reconnect with their own UK pensions. They will not cover overseas pensions, insurance policies, investment accounts, bank accounts, property interests, business interests or other documents an executor may need.

The Dashboard is useful infrastructure. It is not a substitute for keeping your own record.

What This Means for You Right Now

For most people, the first step is not tax planning. It is financial visibility.

Create a clear pension inventory. Record every pension provider you know about, including current workplace pensions, old workplace pensions, personal pensions, SIPPs and any pension arrangements from previous employers. You do not need to record passwords or login credentials. What your executor needs is enough information to identify the provider and begin the formal process. A useful record includes the provider name, the employer or scheme it relates to, the approximate years you contributed, whether an adviser is involved, where documents are stored, and whether an expression of wish form has been completed. The same applies to any life insurance policies not written in trust, which may also need to be reported as part of the estate.

A will does not solve this by itself. A will tells your executor how you want your estate dealt with. It does not usually list every pension provider, old employer, policy reference or online account. Historically, many people did not think pensions needed to be listed in a will because pension pots sat outside the estate for inheritance tax purposes. That assumption is now less safe.

Review your expression of wish forms. These forms tell pension trustees or administrators who you would like to receive pension death benefits. They are not always legally binding, but they are highly relevant. If your pension is likely to pass to someone other than a spouse or civil partner -- including a cohabiting partner who is not married to you -- the tax position may be different from what you expect. Speak to a regulated financial adviser, solicitor or tax specialist before making decisions.

Do not withdraw money from a pension simply because of these changes. Pension withdrawals can create income tax consequences, reduce retirement security, affect investment growth and change your wider estate position. For many people, pensions will remain valuable retirement-planning tools even after the 2027 changes. Take regulated financial advice before making any changes.

Make sure your executor has the map. If your executor knows which pension providers to contact, the formal process can begin. Without that information, they may be spending weeks or months tracking down arrangements while deadlines and interest charges accumulate.

How SuccessionKeeper Helps

SuccessionKeeper was not built as a tax-planning tool. It does not replace advice from a financial adviser, solicitor or tax specialist.

Its purpose is practical. SuccessionKeeper helps you keep a secure record of where your financial life is held -- pensions, insurance, accounts, property, documents and key contacts. It does not store bank passwords, access money, manage investments or give financial advice.

For pensions, you can record each provider, the employer or scheme it relates to, and the approximate years involved. Account numbers and balances are optional. Login credentials are never required.

The platform checks in with you regularly to help keep the record current. If the required verification process is triggered, your nominated people receive a clear reference to help them know where to look.

That will not calculate an inheritance tax bill. It will not decide who should inherit. It will not replace professional advice. But it can help make sure your executor is not starting from nothing.

Frequently Asked Questions

What is changing to pensions and inheritance tax from April 2027?

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. Personal representatives will generally be responsible for reporting and paying any inheritance tax due. The core framework is confirmed in the Finance Act 2026 for deaths on or after 6 April 2027. Some procedural detail, including final guidance, templates and HMRC support tools, is still being finalised.

Do I have to pay inheritance tax on my pension when I die?

It depends on your estate. Unused pension funds will be included in the estate calculation from April 2027. Whether tax is actually owed depends on the total value of the estate against the available nil-rate bands. If the combined estate, including pension, stays within your available thresholds, no inheritance tax is due. Transfers to a surviving spouse or civil partner are also exempt regardless of the estate value.

Will all pensions be taxed from April 2027?

No. Whether tax is due depends on the pension type, the beneficiary and the wider estate. Benefits passing to a surviving spouse or civil partner remain exempt. Charity lump sum death benefits remain exempt. Death-in-service lump sums from registered pension schemes are excluded. Dependants' pensions from defined benefit arrangements are also generally excluded. Even where no tax is due, executors may still need to identify pensions, request values and keep records.

Can I pass my pension to my children after April 2027?

Yes, but it may be subject to inheritance tax unless the estate falls within the available nil-rate bands or another exemption applies. Before April 2027, unused defined contribution pensions could generally be passed to any beneficiary without inheritance tax. After April 2027, the pension value will form part of the estate and may be subject to the standard 40% inheritance tax rate above the applicable thresholds. Speak to a regulated financial adviser before making decisions about pension nominations or withdrawals.

Does the spousal exemption apply to cohabiting partners?

No. The spousal exemption applies only to legally married couples and those in a registered civil partnership. Cohabiting partners who are not married or in a civil partnership do not qualify, regardless of how long they have lived together. From April 2027, a pension passing to an unmarried partner will be included in the estate and may be subject to inheritance tax. If you are cohabiting, review your pension nominations and speak to a regulated financial adviser about your estate position.

What happens to my pension when I die -- will there be inheritance tax?

From April 2027, most unused defined contribution pension funds and lump sum death benefits will be included in the estate for inheritance tax. The pension scheme administrator will need to provide information to the personal representative, who is responsible for calculating and reporting any tax due. Defined benefit dependants' pensions and death-in-service lump sums are generally excluded.

Who is responsible for reporting pension values after death?

Personal representatives -- usually executors or administrators -- will generally be responsible for reporting and paying any inheritance tax due on unused pension funds and pension death benefits. Pension scheme administrators will need to provide relevant information, but they are not generally responsible for calculating the whole estate's inheritance tax position. The executor needs to combine pension values with the rest of the estate.

How long does the executor have to pay any inheritance tax?

Inheritance tax must normally be paid by the end of the sixth month after the person died. HMRC charges interest at its current rate if it is not paid by the due date. The full reporting process may have separate deadlines, and late filing penalties may apply if required forms or accounts are not submitted on time. Executors should take professional advice where the estate is complex, taxable or incomplete.

What happens if the executor cannot find all the pensions?

Executors are expected to take reasonable steps to identify pension arrangements -- searching records, contacting known providers, checking old employers, using tracing services and keeping a clear search log. Personal representatives may be discharged from liability for tax on pensions discovered after they have received clearance from HMRC, provided they made best efforts to track down pension assets first. Newly discovered pension property may still need to be reported.

Are defined benefit pensions affected by the April 2027 changes?

Generally not in the same way. Most defined benefit schemes pay a survivor's pension as ongoing income rather than a transferable lump sum, and dependants' pensions from defined benefit arrangements are generally excluded from the new rules. However, some lump sum benefits from defined benefit schemes -- such as a return of contributions or a guarantee period payment -- may still need to be considered. Executors should ask each scheme administrator what benefits exist and whether any value must be reported.

Should I withdraw money from my pension because of these changes?

Not without taking regulated financial advice. Withdrawing pension money earlier than needed can create income tax consequences, reduce retirement security, affect investment growth and change the estate position. Some people may need to review their retirement income and estate planning strategy, but this should be done with a regulated financial adviser, solicitor or tax specialist.

Will the Pensions Dashboard help executors find pensions?

Partially. The Pensions Dashboard is progressively becoming available in 2026 and should help people reconnect with UK pension arrangements. Schemes in scope are required to connect by 31 October 2026. However, dashboards are not designed as a complete executor tool. They do not cover overseas pensions, insurance policies, investment accounts or other documents an executor may need. A personal record remains important.

Is the pension inheritance tax change definitely happening?

Yes. Finance Act 2026 received Royal Assent on 18 March 2026 and put the main changes into law for deaths on or after 6 April 2027. The framework is confirmed. Some procedural detail -- including HMRC's online tools and final guidance -- is still being finalised ahead of implementation, but the legislative basis is established.

A Final Thought

The 2027 pension and inheritance tax change is not only a tax change. It is also an information problem.

Families need to know what exists, where it is held, who to contact and what may need to be reported.

You cannot remove every burden from your family. But you can make the first steps clearer.

Glossary of Key Terms

Unused pension fund: Pension savings that have not yet been drawn down as retirement income or converted to an annuity -- including any balance remaining in the pot at death, whether the member had started taking withdrawals or not.

Drawdown: A way of taking pension income where the pot remains invested and the member draws an income from it rather than buying an annuity. Any funds remaining in drawdown at death may be included in the estate from April 2027.

Notional pension property: HMRC's technical term for pension value that is brought into the estate calculation for inheritance tax purposes under the new rules.

Personal representative: The person legally responsible for dealing with a deceased person's estate. This is usually the executor named in the will, or an administrator where there is no will.

Pension scheme administrator: The scheme or provider responsible for administering the pension and providing relevant information about pension benefits, values and payment processes.

Nil-rate band: The threshold below which no inheritance tax is normally charged. The standard nil-rate band is £325,000 for the 2026 to 2027 tax year and is frozen until 2031.

Residence nil-rate band: An additional allowance of up to £175,000 that may apply where a home is left to direct descendants, subject to the relevant rules. The combined effect for a couple can be up to £1,000,000.

Exempt beneficiary: A beneficiary whose receipt may be exempt from inheritance tax, such as a surviving spouse, civil partner or qualifying charity, depending on the circumstances. Cohabiting partners who are not married or in a civil partnership are not exempt beneficiaries.

Certificate of discharge: HMRC clearance that can discharge personal representatives from liability for further inheritance tax in certain circumstances. Personal representatives should only apply after they believe all assets, including pensions, have been identified and reported, and any tax due has been paid.

Withholding notice: A notice that may allow a personal representative to instruct a registered pension scheme administrator to withhold up to 50% of relevant pension benefits for up to 15 months from the date of death, where they know or reasonably believe inheritance tax may be due.

Pensions direct payment scheme: A mechanism allowing inheritance tax and interest due on relevant pension value to be paid directly from a registered pension scheme to HMRC where the rules are met.

Defined contribution pension: A pension where the value depends on contributions paid in and investment performance. These are generally central to the April 2027 changes where unused funds remain at death.

Defined benefit pension: A pension where retirement income is based on salary and years of service rather than an individual investment pot. Dependants' pensions from defined benefit arrangements are generally excluded from the new rules, though some lump sum benefits may still need to be considered.

Death-in-service benefit: A lump sum or related benefit provided through employment, often a multiple of salary. Death-in-service lump sums from registered pension schemes are excluded from the April 2027 inheritance tax changes.

Expression of wish: Also called a nomination of beneficiary. A form completed by a pension scheme member telling trustees or administrators who they would like to receive pension death benefits. It is not always legally binding, but it is an important document for estate administration.

Pensions and Inheritance Tax From April 2027: What Families and Executors Need to Know