Pensions have always sat apart from the rest of your estate. Money left unused in a defined contribution pension, such as a SIPP, a personal pension or most workplace schemes, could generally pass to whoever you chose, free of Inheritance Tax, however large the fund.

From 6 April 2027, that changes. Most unused pension funds and lump sum death benefits will be added to the value of your estate for Inheritance Tax purposes. This isn't a proposal still working its way through Parliament, it's already law under the Finance Act 2026. Only the start date is still to come.

The knock on effects go further than the headline rate suggests. Inheritance Tax thresholds are already frozen until 2031, so more estates will be caught regardless of this change, and pension wealth layered on top pushes many over the line for the first time. Responsibility for reporting and paying also shifts: it becomes a job for your personal representatives, not your pension provider, which makes choosing your executors, and telling them what you hold, matter more than it used to.

There's also a less obvious trap. Pensions left to anyone other than a spouse, civil partner or charity can, depending on your age at death, face Inheritance Tax and income tax on the same money, a combined bite that can run well beyond 40%.

Read our full guide for a worked example of what this could mean in pounds and pence, which pension benefits stay protected, and a practical checklist for reviewing your will, nominations and life cover before April 2027.

If you hold a defined contribution pension and haven't reviewed your estate plan since these changes were confirmed, get in touch, we can check how the new rules affect you and your family.