From 6 April 2027, most unused pension funds and death benefits will count towards your estate for inheritance tax — legislated in Finance Act 2026, with HMRC’s technical note (updated 29 May 2026) setting out the mechanics. Pensions stop being the tax shelter that sat outside your estate plan.
The families most affected are not the wealthiest — they are the ones who assumed they were under the threshold. A £700,000 house plus £500,000 of pensions is a £1.2 million estate from 2027, not £700,000. Where death occurs at or after 75, beneficiaries can face income tax on the same fund that has already been hit by inheritance tax.
Six things worth doing in the time left: list every pension and its current value; reverse the old spending order and consider drawing pension income within lower tax bands; use gifts out of surplus income (documented properly) plus the £3,000 annual exemption; consider whole-of-life cover written in trust to fund the eventual bill; review your Will and trusts alongside the pension; and update every expression of wish form.
What not to do: strip the pension in a rush, or give away money you might need for care.