Pension Awareness Week 2026: Are your Pension and Estate Plans Ready for 2027?

For many people, a pension is simply a way of saving for retirement, however, pensions often represent one of the most valuable assets they own and can pay a key role in estate planning.

This Pension Awareness Week is particularly significant because major changes to the Inheritance Tax (IHT) treatment of pensions are due to come into effect from 6 April 2027. Under the new rules, most unused pension funds and pension death benefits will be brought into the scope of the inheritance tax (“IHT”) regime.

For many families, this could have significant impact and will factor into the decisions they make in relation to their estate planning.

What Are the Changes?

Traditionally, pension funds have been attractive from an estate planning perspective because they have generally fallen outside an individual’s estate for IHT purposes. This has often allowed pension wealth to be passed to beneficiaries without increasing the IHT liability on the estate.

From April 2027, that position will change. Broadly, most unused pension funds and pension death benefits will be taken into account when calculating the value of an estate for IHT purposes.

As a result, individuals who have accumulated substantial pension savings are likely to see the overall value of their net estate significantly increase for IHT purposes.

Why Does This Matter?

The current IHT nil rate band (“NRB”) has remained at £325,000 for many years, with the potential addition of the £175,000 residence nil rate band (“RNRB”) where relevant conditions are met.

Many estates that currently fall within available allowances may, from April 2027, exceed these thresholds once pension assets are brought into account. This could:

• Increase the value of the taxable estate.
• Result in a larger IHT liability.
• Reduce the amount ultimately passed on to beneficiaries.
• Impact the effectiveness of existing estate planning arrangements.
• Result in the loss of tapering of the RNRB where the estate exceeds £2 million.

For those with significant pension wealth, the new rules may fundamentally change how their estate is structures and passed on to future generations.

Time to Review Your Will and Your Pension Nomination Forms.

These changes highlight the importance of keeping your Will under regular review and ensuring it aligns with your pension nomination forms.

While pension benefits are typically distributed separately from your Will, they now form a much more important part of the wider estate planning picture. A Will that was drafted years ago may have been prepared on the assumption that pension assets would sit outside of the IHT calculation.

With pensions potentially increasing the size of your taxable estate, it is sensible to review whether your existing Will and estate planning arrangements still achieve the outcome you intend.

Speak to Your Advisors

The upcoming changes reinforce the importance of taking both financial and legal advice.

Your pension provider or independent financial adviser can help you understand how the rules may affect your pension arrangements and retirement planning. They can also advise on whether your current pension strategy remains appropriate in light of the changes.

At the same time, it is important to consider the wider estate planning implications. Your pension does not sit in isolation. It forms part of your overall wealth and should be considered alongside your Will, trusts, lifetime gifting plans and IHT position.

Looking Ahead

Pension Awareness Week is about far more than retirement. It is an opportunity to understand how your pension fits into your wider financial affairs and the legacy you hope to leave to your loved ones.

With the April 2027 changes fast approaching, now is the ideal time to review your pension arrangements, beneficiary nominations and estate planning documents.

Our Wills, Trusts and Estates team can work alongside your financial advisers to review your wider estate planning arrangements and help ensure they remain effective, tax efficient and aligned with your wishes for the future.

If you would like to discuss your Will, estate planning or potential impact of the upcoming pension reforms, please do not hesitate to get in touch with Ben Oliver at: ben.oliver@fsp-law.com or contact our Wills, Trusts & Estates Team.