The government’s decision to bring unused pension funds within the scope of inheritance tax (IHT) has been met with strong opposition from the pensions industry. For individuals who have diligently saved for retirement, believing they could pass on any unused pension to their beneficiaries tax-free, this proposal feels particularly unfair—especially in the absence of any transitional protections.
One key advantage of contributing to a small self-administered scheme (SSAS) has been the ability to transfer wealth to future generations in a tax-efficient way. The release of draft rules is awaited to clarify the practical implications, but a key area of interest is how discretionary death benefits will function after the new rules take effect in April 2027.
In most schemes, trustees have the discretion to allocate death benefits, although they typically consider any expressions of wishes or nominations made by the client. Wherever possible, trustees aim to honor the deceased client’s preferences. It is also important to note that, under current rules, trustee discretion over death benefits is essential to prevent the pension from falling within the scope of IHT.
