What Pensions, IHT and the April 2027 changes mean for advisers

For over a decade, pensions have been an important part of estate planning. Although their primary purpose is to provide an income in retirement, their inheritance tax (IHT) treatment has also made them useful for passing on wealth.

That is changing.

From 6 April 2027, most unused pension funds and death benefits will be brought within the scope of IHT. While many of the details are still being refined, the direction of travel is now clear and it’s worth considering how these changes could affect your clients, their potential beneficiaries and existing financial plans.

Pensions are joining the wider estate planning conversation

Historically, pension wealth has often been viewed differently from other assets because it generally sat outside the estate for IHT calculations. Under reforms announced in the Finance Act 2026, that will change and pension assets will need to be considered alongside property, investments, cash savings and other estate holdings when determining potential IHT liability.

For clients with significant pension wealth and estate planning objectives, the changes are likely to require a reassessment of their wider wealth and estate planning arrangements.

Perhaps the more interesting question is whether long-standing retirement and estate planning assumptions still hold true. For many years, clients have been encouraged to preserve pension wealth and spend other assets first. From April 2027, Advisers may need to reconsider how pensions should sit alongside ISAs, investments, gifting strategies and wider wealth transfer plans. 

Family wealth planning could move up the agenda

Many of your clients may already support family members through gifting, education funding, housing support or other forms of financial assistance. As a result you may see more clients looking to better understand how existing exemptions and allowances fit into wider estate planning objectives.

This could include discussions around:

• Potentially Exempt Transfers (PETs),
• Gifts out of surplus income,
• Charitable giving
• Spouse and civil partner exemptions
• More detailed intergenerational wealth planning

And, don’t forget that charitable giving remains an important consideration when the rate of IHT falls from 40% to 36% where at least 10% of the net estate above available thresholds is left to charity.

These changes may also create opportunities to deepen relationships across multiple generations of the same family. You may find yourself supporting clients and their families more closely at a time when they'll be navigating bereavement and complex financial decisions.

If you’re looking to encourage more open conversations about finances within families, our article From Silence to Strategy: The Power of Advice for Family Finances explores some of the barriers families face when discussing wealth and how you can help facilitate those conversations.

Spouses and civil partners remain an important consideration

The upcoming changes do not alter the existing inheritance tax exemption for transfers between spouses and civil partners.

Understanding how pension benefits interact with wider estate planning arrangements will remain important. For some clients, providing for a surviving spouse or civil partner will continue to be a key priority. For others, attention may be on passing wealth efficiently to future generations while making use of available exemptions and reliefs.

Don’t get caught out by the tax questions

One concern you’re likely to hear is that inherited pension funds will be taxed twice.

However, HMRC's proposed framework includes provisions designed to prevent unfair outcomes where both IHT and income tax could otherwise apply to pension death benefits. Their technical note explains that where pension benefits are used to settle an inheritance tax liability, any subsequent income tax charge is calculated after the inheritance tax deduction has been made.

As a result, the focus for advisers is likely to be understanding how the two taxes interact.

Good administration could become even more valuable

HMRC's technical note also highlights the importance of maintaining accurate records of pension arrangements and ensuring personal representatives can access the information they need following a death.

"Pension schemes may want to encourage members to keep an up-to-date record of all their pension arrangements to help their personal representative after their death."

This is where you'll continue to add significant value.

Most scheme administrators will keep their discretionary powers regarding allocation of death benefits so its still really important to keep nominations up to date and review them regularly. It would also be a good time to discuss the importance of having an up to date Will. For clients with multiple pension arrangements, clear records could significantly reduce complexity for their families at an already difficult time. 

Don’t forget: Pensions are still pensions!

It may be tempting for some clients to question the value of pension saving if unused pension funds become subject to IHT.

However, these changes don’t remove many of the existing advantages pensions offer.

• Tax relief on contributions
• Employer contributions
• Tax-efficient investment growth
• Flexible retirement income options
• Attractive long-term savings potential 

For many clients, pensions may continue to represent one of the most attractive long-term savings vehicles available.

The difference from April 2027 is that pension wealth is likely to be considered as part of a broader conversation around retirement income, sequencing, gifting strategies and how different wrappers work together.

While it’s still early days, there are already signs that advisers are revisiting established assumptions. The Lang Cat reported that Onshore Bond sales increased a whopping 67.9% in 2025, suggesting that conversations may already be taking place around tax wrappers, estate planning and intergenerational wealth transfer. 

Looking ahead

The inclusion of pension wealth within the scope of IHT represents one of the most significant pension taxation changes in recent years.

While further guidance is still expected, now is a good time to start thinking about how these changes could affect your clients. For many, the conversation won’t simply  be about tax, but about retirement income, beneficiaries, family objectives, and ultimately how wealth will be passed on.

Advisers who begin having those conversations early will be best placed to help clients navigate the changes ahead.

To support you we'll continue to share guidance, insights and practical updates as further details emerges and the new framework takes shape.