Pension Inheritance Tax Changes: Executors Beware
New HMRC guidance published this week has laid bare just how complicated the government's plan to bring pensions into inheritance tax actually is — prompting solicitors to warn of "chaos" for the executors who will have to make it work. From 6 April 2027, most unused pension funds and death benefits will count towards the value of your estate for inheritance tax purposes for the first time. If you're likely to be named as an executor for a family member, or you're planning your own estate, this is a change worth understanding well before it takes effect.
What's Actually Changing
Currently, pensions sit largely outside the inheritance tax net, which is one reason many people have been advised to spend other assets first in retirement and preserve their pension as a tax-efficient way to pass on wealth. From April 2027, that changes. Unused pension funds and death benefits will be added to the rest of the estate and could be taxed at 40% above the nil rate band, unless they pass to a surviving spouse or civil partner, or to a registered charity. HMRC estimates the change will pull around 49,000 estates into inheritance tax scope in its first year alone — many of them families who have never had to think about IHT before.
Why Executors Are the Ones Facing the Fallout
The detail causing the most concern isn't the tax itself, but who has to administer it. Responsibility for reporting and paying the pension-related inheritance tax will fall to the estate's executor, not the pension scheme administrator. Pension providers can take months — sometimes years — to confirm valuations and identify beneficiaries, which leaves executors trying to calculate a tax bill using information they may not be able to get hold of quickly. Professional bodies have raised strong objections to this structure, warning it places an unfair administrative burden on ordinary people acting as executors, often for the first time, while they're also grieving.
The Double Tax Trap to Watch For
There's a further sting for some beneficiaries. Where an inherited pension is also drawn down as income, it can attract income tax of up to 45% on top of the inheritance tax already charged, creating a combined effective tax rate that campaigners say can reach 64–67% in some cases. This combination — inheritance tax on the pension's value, followed by income tax when the money is actually drawn — is not always obvious to families until they're already dealing with the estate.
What You Can Do Before April 2027
The changes don't take effect until 6 April 2027, which gives individuals and families genuine time to plan. That might mean reviewing how pension wealth sits alongside other assets in your estate, considering nominations and beneficiary choices on existing pensions, or simply making sure whoever you've asked to be your executor understands what they're taking on. For anyone currently acting as an executor for an estate that will still be open after April 2027, it's worth getting a clear picture of the pension position sooner rather than later.
Why Early Advice Matters More Than Ever
Estate planning that made perfect sense under the old rules may need a second look under the new ones, particularly for anyone with a reasonably sized pension pot alongside property or savings. A solicitor with experience in estate planning can help you understand where your estate is likely to sit once the pension change lands, and what steps — if any — are worth taking now rather than waiting until 2027.
What Should You Do Next?
If you want to understand how the pension inheritance tax changes could affect your estate, or you're an executor trying to get ahead of a complicated administration, don't wait until April 2027 to find out where you stand. QualitySolicitors' first contact team will listen to your situation and connect you with a local solicitor who specialises in wills, estate planning and probate. Get in touch today to start the conversation.