From 6 April 2027, unused pension funds and certain death benefits will be included in inheritance tax calculations, changing the way retirement and estate planning are approached.
For years, defined contribution pensions have been a key part of intergenerational planning because they generally sat outside the estate. That assumption is now changing, creating a need for advisers to revisit retirement income, beneficiary choices, gifting, trusts, protection and investment strategies.
The change is not just a tax issue but an advice challenge. Firms will need to identify where existing plans may no longer achieve clients’ objectives, while ensuring any recommendations remain suitable and well evidenced.
The impact will be felt most by clients without a spouse or civil partner, as well as blended families and those planning to pass pension wealth to children. Including pensions within estates could also increase inheritance tax liabilities or affect access to existing allowances.