For our clients, the succession of their wealth they have built up over their lives is a priority. Mitigating, as far as possible, the level of Inheritance Tax (IHT) payable on their legacy or passing funds to beneficiaries throughout their lifetime forms a key part of their financial plan.

From 6 April 2027, the UK government will include most unused pension funds and death benefits in the value of an estate for Inheritance Tax purposes.

That means where unused pensions could be used as part of a tax-efficient wealth-transfer strategy may now expose more estates to IHT.

Estates that previously sat below the threshold could now face an Inheritance Tax bill and more complexity in settling it.

What’s changing:

• Pensions added to estate value: Defined contribution pensions and most death benefits will be included in IHT calculations from 6 April 2027.
• Exceptions maintained: Death-in-service benefits paid from registered pension schemes remain exempt
• New responsibilities: Personal representatives (executors) will now be responsible for reporting and paying any IHT due—and failure to liaise or settle within six months could trigger costly penalties
• Carry-forward relief preserved: Transfers to surviving spouses, civil partners, or registered charities remain exempt

What this means for individuals and families:

• Estates close to thresholds may now cross into IHT liability territory, even if pensions were previously excluded.
• Executors face new administrative tasks: locating pension schemes, valuing them, and facilitating IHT within tight deadlines.
• Effective pre-death planning including leveraging exemptions and preserving liquidity, has never been more critical.

How AC Wealth can help you secure your financial legacy:

• Comprehensive estate reviews: We assess how upcoming IHT changes may affect your pension arrangements and overall estate value.
• Strategic wealth structuring: Combining pension drawdowns, lifetime gifts, and preserving exemptions to mitigate IHT exposure.
• Executor support: Guidance to streamline pension validation and IHT settlement.

Estate planning is a complex area of financial planning, and one where taking professional advice is of great importance.

Our experienced Financial Planners will work with you to recommend the most suitable course of action to meet your objectives.