Why It May Be Worth Reviewing Your Estate Planning Ahead of 2027

From April 2027, most unused pension funds and death benefits will be brought into the value of your estate for Inheritance Tax (IHT) purposes. For decades, pensions sat outside your estate, one of the most effective ways to pass on wealth tax-efficiently. That's changing, and if your financial or estate plan was built around the old rules, it's worth revisiting sooner rather than later.

What's actually changing

Under current rules, most defined contribution pensions can be passed to beneficiaries free of Inheritance Tax, regardless of the size of your estate. From 6 April 2027, HMRC will treat unused pension funds as part of your estate on death, meaning they could be liable for IHT at 40% above your available nil-rate band.

This is a significant shift. Many people have deliberately drawn down other assets first, ISAs, savings, investment portfolios, specifically to preserve their pension as the more tax-efficient asset to leave behind. That strategy needs a second look.

Why this matters even if you're years from retirement

It's tempting to think of this as a “later” problem. But estate planning decisions, how you structure your will, whether you use trusts, how you sequence which assets you draw down in retirement, often need time to implement properly. The earlier you understand how the changes affect your specific position, the more options you have.

If you've already gone through the process of consolidating your pensions into a single pot, something we covered in The Benefits of Pension Consolidation, this is a good moment to revisit that plan, not because consolidation was the wrong move, but because how much sits in that pot will have different estate implications after April 2027 that it did previously.

What to consider now

●      Review your will and expression of wishes, particularly if your estate plan assumed pensions would pass outside your estate

●      Reconsider your drawdown order, the old logic of “spend everything else first, pension last” may no longer hold for everyone

●      Think about lifetime gifting, using annual exemptions and other allowances to reduce your estate's exposure while you're able to

●      Talk to an adviser before making changes, these rules interact with your wider estate, and decisions made in isolation can create new problems elsewhere, we’d love to help

Investments can fall as well as rise in value, and you may get back less than you invest.