Financial planners warn we still don’t know the full impact of the new tax
Big changes are coming to pension taxes, with financial planners urging people to take a few simple steps now.
Starting in April 2027, money left untouched in your pension pot when you die will count as part of your overall estate—meaning it could be hit with a 40% inheritance tax bill. While the new tax might sound alarming, experts say the best approach is to get organised rather than worry. Angela Davis, a chartered financial planner at advice firm Hymans Robertson, said: “It is important not to panic but do understand how the value of your estate will be impacted.”
The Government hasn’t published all the fine print for how the tax will work in practice. But Ms Davis said we will likely be told more very soon.
Key dates
She said: “HMRC are still publishing technical notes and guidance about the changes and have said that full guidance and supporting materials are planned for spring 2027. An additional technical note is expected this autumn with more detail on international aspects, intestacy, charities and trusts.
“So until this is in place we won’t know the full impact for pensions.” Even without every detail finalised, one thing is clear: anyone sorting out a relative’s estate after they pass away will have some more paperwork to do.
Ms Davis said: “What we do know is that personal representatives (executors) will have increased duties and administration burden as they will be responsible for locating and listing every pension scheme which the deceased held and providing valuations to include in the estate valuation.”
To make things easier for your family, she suggests building a quick checklist for every pension you hold and keeping it in a safe place. You need to have these details on file:
- Name of the pension provider
- Account or policy number
- Phone number for customer service
Check your details are up to date
Another crucial task is checking who is named as the beneficiary on your pensions. This is often done through an ‘expression of wish’ form.
Ms Davis warned that people frequently forget to check this is up to date. She explained: “This can be more than one person. Pensions do not automatically follow a will and often people forget to complete the information or it is out of date.
“This can be done by contacting the pension provider and only takes a couple of minutes.” If you’ve gone through a life change like a divorce, an outdated form could mean your money accidentally goes to an ex-partner instead of your current family.
The upcoming rules are a good reminder to get your affairs in order across the board. Ms Davis said: “Every adult should have a will in place and ensure that on life events (marriage, children, divorce for example) that it is kept up to date and mirrors your wishes.”
An HMRC spokesperson said: “More than 90% of estates will still pay no inheritance tax, including on pension funds. We want to help people get their tax right and we’re continuing to provide information about how the taxation of unused pension funds and death benefits will work.
“We’ve published detailed notes to provide further clarity, and will publish further guidance ahead of the changes coming into effect.”
