From 6 April 2027, defined contribution pension pots will be included in your estate for inheritance tax purposes. This is the biggest change to IHT planning in a generation. Here is what you need to know and do before the deadline.
⏰ Approximately 10 months until 6 April 2027 — the date pensions enter the IHT estate
Currently, defined contribution pension pots — including SIPPs, workplace pensions, and personal pensions — sit outside your estate for inheritance tax purposes. When you die, the pension fund passes to your nominated beneficiaries free of IHT, regardless of how large it is.
From 6 April 2027, this changes. Under the Finance Act 2024, undrawn pension funds will be included in your taxable estate. They will be added to everything else you own — your home, savings, investments, and other assets — and the combined total will be subject to IHT at 40% above the available nil rate bands.
This is not a proposal — it is law. The Finance Act 2024 received Royal Assent. The April 2027 commencement date is confirmed. While some professional bodies are lobbying for amendments to the implementation mechanics, the core change — pension inclusion in the IHT estate — is not expected to be reversed.
The change applies to:
The change does not apply to:
You are likely to be affected if:
The conventional wisdom is now wrong. For years, financial planners advised clients to spend ISAs, savings and other assets first, and preserve the pension pot because it sat outside the IHT estate. From April 2027, that advice needs to be completely reassessed for many people.
People who are least affected:
| Asset | Value | IHT position before April 2027 | IHT position from April 2027 |
|---|---|---|---|
| Residential property | £450,000 | In estate | In estate |
| Savings and ISAs | £100,000 | In estate | In estate |
| SIPP pension pot | £300,000 | Outside estate — tax free | In estate from April 2027 |
| Total estate | £850,000 | £550,000 taxable | £850,000 taxable |
| NRB + RNRB (single) | £500,000 | £500,000 available | £500,000 available |
| Taxable above threshold | £50,000 | £350,000 | |
| IHT payable at 40% | £20,000 | £140,000 |
In this example, the pension inclusion increases the IHT bill from £20,000 to £140,000 — a difference of £120,000 for a relatively modest estate.
Pension nomination forms — sometimes called expression of wishes forms — remain important but their role changes after April 2027.
Currently, the nomination form determines who receives the pension pot free of IHT. Because the pension sits outside the estate, the nomination bypasses probate and avoids IHT entirely.
From April 2027, the pension will be in the estate for IHT purposes, but the nomination form still determines who receives it. The pension scheme trustees are still not legally bound by the nomination — it remains a statement of wishes — but in practice they follow it in the vast majority of cases.
Review your nomination form now. Check who you have nominated. If your circumstances have changed — divorce, remarriage, children, grandchildren — update the form with your pension provider. The nomination form and your Will should be consistent with each other.
There is no simple single solution — the right approach depends entirely on your individual circumstances. However, these are the key areas to consider:
Map out your total assets including the pension. Calculate your approximate IHT position both now (pension excluded) and from April 2027 (pension included). This gives you a clear picture of the scale of the change for your specific situation.
If you have been deliberately preserving your pension and spending other assets, consider whether that strategy still makes sense. In some cases, drawing more from the pension now — and spending or gifting those funds — may reduce the overall IHT bill.
You can give away up to £3,000 per year free of IHT (the annual exemption). Larger gifts are potentially exempt transfers — they fall out of your estate after 7 years. If you have capacity to gift, doing so before April 2027 reduces your taxable estate whether or not it includes the pension.
Your Will may have been drafted on the assumption that the pension passes outside the estate. Now that it forms part of the estate, the distribution of your estate may need to be reconsidered — particularly if you have used specific legacies or percentages that assumed a different taxable total.
Transfers between spouses and civil partners are still exempt from IHT — including pension transfers. If you are married, the pension paid to your spouse on death remains exempt. But if your spouse then holds a large pension pot when they die, the combined estate of the surviving spouse could face a significant IHT bill.
Possibly — and this is the area where most people need to act. A Will drafted before 2024 was written on the assumption that your pension sits outside your estate. That assumption is now wrong from April 2027.
Specific situations where your Will almost certainly needs reviewing:
DocPilot's Wills and Legal templates are updated for the April 2027 pension IHT changes — with warnings and guidance flagged throughout every Will template. Updated May 2026.
Get Wills Complete Bundle — £49.99 →This guide provides an overview of what changes and what to consider. However, IHT planning is highly individual — the right strategy depends on your total assets, income needs, family circumstances, and existing arrangements.
We recommend getting professional advice from a qualified financial adviser or solicitor if:
DocPilot templates are professionally drafted self-help documents — they are not a substitute for professional legal or financial advice where your situation requires it.
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