New pension rules For 2027
From 6 April 2027, new rules mean most unspent pension funds will be included in an individual’s estate for inheritance tax (IHT) purposes. This applies to defined contribution and defined benefit schemes not being paid. This will mean that these funds may be taxed at 40% if the estate exceeds the £325,000 nil-rate band, unless exemptions apply.
Under the new rules, pension scheme administrators (PSAs) will be responsible for calculating and paying any IHT due directly to HMRC, usually within 60 days of death. This helps ensure beneficiaries receive their share without additional tax delays.
Some pensions remain IHT-free, such as dependants’ scheme pensions (e.g. spouse annuities) and charity lump-sum death benefits, which is great news for those considering leaving a legacy to St Wilfrid’s Hospice.
Importantly, if 10% or more of your chargeable estate is left to charity, the IHT rate on the remainder of your taxable estate may be reduced from 40% to 36%. This can significantly increase what you leave to loved ones, while also supporting a cause close to your heart. This reduction applies to pensions now included in your estate, making charitable gifts even more tax-efficient.
We recommend speaking with a qualified adviser to ensure your Will reflects these changes. By planning ahead, you can reduce tax, support your family and leave a lasting impact on St Wilfrid’s Hospice.
