Key facts
- From April 6, 2027, most unused pension funds and death benefits will be included in a deceased person's estate for inheritance tax.
- The change aims to stop pensions being marketed as a tax planning vehicle for wealth transfer.
- Currently, defined contribution pensions generally sit outside the estate for inheritance tax purposes.
- Under current rules, death before age 75 can result in beneficiaries inheriting the pot tax-free.
- Death at or after age 75 under current rules means beneficiaries pay income tax on withdrawals, but no inheritance tax.
New inheritance tax rules in the UK, effective from April 6, 2027, will include most unused pension funds and death benefits within a deceased person's estate. This legislative change, enacted through Finance Act 2026, aims to prevent pensions from being primarily used for tax-efficient wealth transfer and to standardize their treatment for inheritance tax purposes. The current system allows defined contribution pensions to largely bypass inheritance tax, particularly if the member dies before age 75. The government has outlined a timeline for implementing the new rules, including the release of draft regulations and guidance throughout 2026.