01/09/2026
Seven months from now, on 6 April 2027, unused pension funds come into the inheritance tax net.
For twenty years, the logic ran one way: spend everything else and leave the pension alone. It sat outside the estate. It was the efficient thing to pass on.
From April 2027, that reverses. Unused pension funds and most pension death benefits will count as part of the estate, taxed at 40% above the available nil-rate bands – £325,000 each, plus up to £175,000 of residence nil-rate band. Those bands are frozen until April 2031, while pension pots and house prices are not.
So many estates that were comfortably under the threshold are about to cross it. And many drawdown plans were written for a world that ends in seven months.
Three things worth checking now rather than next March:
• Whether the order you draw income from still makes sense
• Who is currently nominated to receive your pension death benefits
• Whether your will and any trusts still do what you intended
There is no need to rush. The change is seven months away, not immediate, and hurried gifting carries its own cost. But pension, tax and estate planning intersect – and changing one without looking at the others is how expensive mistakes happen.
We have been working through this with families and their advisers since it was announced. To talk it through: 0118 934 7920.
