Overview
- HMRC has confirmed that, from 6 April 2027, most unused defined‑contribution pensions and death benefits will be added to a deceased person’s estate when calculating inheritance tax.
- Personal representatives will be legally required to take “reasonable steps” to find and report pension assets to HMRC, creating new information‑sharing duties for estates and pension schemes.
- The change sets an IHT-first then Income Tax-second order so beneficiaries may face IHT on the pension value and then pay Income Tax when they withdraw inherited pension money, though some death‑in‑service payments, joint life annuities and dependent scheme pensions remain exempt.
- The reform mainly hits defined‑contribution pots and unused drawdown accounts while most defined‑benefit public‑sector pensions are less exposed, and advisers warn locating fragmented records and coordinating multiple providers will be time consuming for bereaved families.
- HMRC published a timetable that began with draft rules in spring 2026, plans to lay regulations in summer 2026 and will issue further guidance and operational details over autumn and winter ahead of the April 2027 start, prompting some savers to consider staged withdrawals, gifting, annuities or insurance to limit future tax bills.