Overview
- HMRC set out technical details that let personal representatives ask pension schemes to hold up to half of a death benefit for as long as 15 months while any inheritance tax is worked out, with the power used only in limited cases.
- From April 6, 2027, most unused pension funds and some pension death benefits will count toward a person’s estate for inheritance tax, which is charged at 40% on amounts above current thresholds such as £325,000 for an individual.
- Payments to a spouse or civil partner stay exempt from inheritance tax and death‑in‑service benefits are expected to remain outside the new rules, and even when a hold is requested beneficiaries must still be able to access at least 50% promptly.
- Executors will need to track down all pension pots, obtain valuations and report them to HMRC through a new digital system, and the tax bill is usually due within six months of the month of death before interest starts to accrue.
- HMRC frames the withholding as a way to pay any bill from the pension rather than other assets, while industry figures warn of heavier paperwork and slower payouts and urge people to update beneficiary forms ahead of final guidance in spring 2027.