Pensions and inheritance tax: why it’s time to review your plans

Pensions have long been an important part of retirement planning. For many people, they have also been a useful way of passing wealth on to the next generation.

From 6th April 2027, most unused pension funds and pension death benefits will generally be included when calculating the value of an individual’s estate for Inheritance Tax purposes. The change applies to deaths on or after this date.

This could have significant implications for individuals with larger pension pots, particularly where pensions have been retained as part of a wider strategy for passing wealth to family.

What does this mean in practice?

• Under the current rules, many unused pension funds sit outside the estate for IHT purposes.
• From April 2027, that will generally no longer be the case.
• For those with substantial pension savings, this could increase the value of their estate for IHT purposes and may change the balance between drawing on pension savings and using other assets during retirement.

It also means that pension planning can no longer be considered entirely separately from wider estate and succession planning.

Now is a good time to review your position

April 2027 may still feel some way off, but decisions around pensions, investments and estate planning should not be made at the last minute.

If you have built up significant pension savings, it is worth considering how the changes could affect your estate and whether your current retirement and succession plans still make sense.

There is no single solution that will suit everyone. The right approach will depend on your pension arrangements, wider assets, family circumstances and long-term objectives.

Get in touch for support

At Verallo, we help clients understand the tax implications of their pensions, investments and wider financial arrangements, providing advice to help them plan ahead as tax rules change.

If you’d like to discuss how the changes could affect you, get in touch with the Verallo team.