Pension inheritance tax from April 2027: what it means for your pipeline
The law as it stands, who pays, which clients are calling, and whether your firm has the capacity to take the work on.
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We don't give advice, so this post won't tell you how to plan a client's estate. You know that work better than we do. What it covers is the part we see from booking appointments: a rule change that sends a lot of worried people to Google, and what that does to an advice firm's pipeline and diary. It starts with the law, stated precisely, because a sloppy summary of this change is a compliance problem in your marketing and a credibility problem in the first meeting.
What changes on 6 April 2027?
Until now, most defined contribution pensions sat outside the estate for inheritance tax. Scheme administrators usually have discretion over who receives death benefits, so the money never formed part of the member's estate. That made the pension one of the most tax-efficient things a wealthy client could leave, and plenty of retirement income plans were built around spending other assets first.
Finance Act 2026 changes that for deaths on or after 6 April 2027. Section 66 inserts a new section 150A into the Inheritance Tax Act 1984, treating the member's "notional pension property" as part of their estate. Sections 67 and 68 deal with liability and payment, sections 69 and 70 make the connected changes (including to income tax), and section 71 sets the start date. The Act received Royal Assent on 18 March 2026.
HMRC's own wording is the one to borrow for anything client-facing: "most unused pension funds and death benefits" will be brought within the value of the estate, which is narrower than "all pensions". The HMRC technical note (updated 29 May 2026) sets out what's in and what's out.
| Item | Position for deaths from 6 April 2027 |
|---|---|
| Unused DC funds (drawdown, uncrystallised funds, SIPPs) | In the estate for IHT |
| Lump sum death benefits | In the estate for IHT |
| Death-in-service benefits from a registered scheme | Excluded |
| Dependants' scheme pensions | Excluded |
| Dependants' or nominees' annuities bought with the member's lifetime annuity | Excluded (a standalone dependants' annuity is not automatically excluded) |
| Pension passing to a spouse or civil partner | Counted, but the spouse exemption applies |
| Charity lump sum death benefit | Counted, but exempt when paid to a qualifying charity |
The nil-rate band (£325,000) and residence nil-rate band (£175,000, tapered away above a £2m estate) don't move to make room: both stay frozen until April 2031. The residence band only applies when a qualifying home passes to direct descendants, so it isn't a general allowance. For a client whose estate already uses the bands available to it, every pound of unused pension is potentially taxed at 40%. The larger the pension relative to the rest of the estate, the bigger the change, which is why the clients most affected look a lot like the clients most firms want.
One timing detail matters for your diary. HMRC has said its detailed guidance will be published in April 2027, the month the rules start. Expect a second wave of questions then, from clients and from solicitors acting as personal representatives.
Who pays the tax, and what do pension schemes have to do?
The government dropped its original idea of making scheme administrators responsible. Under section 67, personal representatives report and pay the inheritance tax on pension property, as they do for the rest of the estate. Once pension money vests in a beneficiary, that beneficiary becomes jointly and severally liable for the tax on it. Scheme administrators are only on the hook if they ignore a valid notice.
Section 68 gives the PRs two tools, and both are worth understanding because clients' families will ask about them:
- Withholding notice. A personal representative (or someone about to become one) who reasonably believes IHT may be due can tell the scheme to hold back up to 50% of each beneficiary's entitlement. The hold lasts until the tax is paid, the notice is withdrawn, or 15 months after the end of the month of death, whichever comes first.
- Payment notice. A PR or a liable beneficiary can direct the scheme to pay the IHT (and interest) straight to HMRC from unpaid benefits. The scheme has 35 days from a valid notice. The minimum amount is £1,000.
- Deadlines. The tax is due by the end of the sixth month after the month of death, with interest after that. Schemes have 28 days to give the PRs a valuation when asked.
For an adviser, the practical point is that death now creates an administrative workload that involves the pension scheme, the solicitor and the family at the same time. Firms that already work closely with estate solicitors are better placed. That's also a referral route: one firm, Depledge Strategic Wealth Management, told IFA Magazine it had seen a sixfold increase in approaches from law firms in the first four months of 2026. That's one firm's account, not a market measure, but it tells you where some of the enquiries are coming from.
How much of a pension reaches a beneficiary after age 75?
This is the number that gets clients' attention, and it's worth being precise about.
If the member dies before 75, death benefits are usually free of income tax for the beneficiary, provided they're paid within two years and, for lump sums, within the deceased's lump sum and death benefit allowance. From April 2027 the fund may still bear inheritance tax. If the member dies at 75 or over, the beneficiary pays income tax at their own rate on whatever they draw, and the fund may also bear inheritance tax. HMRC's rules stop income tax being charged on the slice used to pay the IHT (and interest), so the two taxes don't stack in full. They still compound.
Illustrative: £500,000 pension, entirely within the 40% band, member dies at 78, beneficiary pays 45% income tax
IHT: £500,000 × 40% = £200,000 · Income tax on the remaining £300,000 × 45% = £135,000
Reaches the beneficiary: £165,000 · Combined effective rate: 67% (64% for a 40% taxpayer)
Move the sliders below to see how the picture changes. It's a conversation aid for your own first meetings, not a planning tool.
Age at death
Illustrative only, not tax or financial advice. The IHT rate is your assumption, not a calculation of the estate. It applies one income tax rate to the whole post-IHT amount, assumes under-75 benefits are paid within two years and within the lump sum and death benefit allowance, ignores interest, reliefs and the timing of withdrawals, and assumes the IHT is paid from the pension. Your own calculations and advice process apply.
Two things follow for your conversations. First, age 75 now matters more than it did, so a client in their early seventies with a large untouched pension is having a different conversation from one at 65. Second, the gap between "spouse inherits" and "children inherit" is large, which is why unmarried couples come up so often in the professional commentary.
How many of your clients does this affect?
Nationally, a minority of estates with pensions. How many of your own clients depends entirely on your book.
HMRC's policy costing (26 November 2025) estimates that in 2027 to 2028 around 10,500 estates will pay IHT for the first time and around 38,500 will pay more, with an average increase of about £34,000. HMRC calls those static figures a potential maximum because they ignore changes in behaviour. The behaviour-adjusted Exchequer forecast is £710m in 2027 to 2028, rising to £1.665bn by 2030 to 2031. For scale, total IHT receipts were £8.5bn in 2025 to 2026.
HMRC puts those figures against around 213,000 estates with inheritable pension wealth in 2027 to 2028, so almost one in four estates with a pension is expected to pay more or pay for the first time. The estates affected will typically combine a home, other assets and a meaningful pension, which describes plenty of advised clients. When Quilter polled more than 460 IFAs at its roadshows in March 2025, advisers estimated that 52% of their clients would be affected. That's advisers' estimates, not measured data, from a self-selected group of advisers. Your own number could be much higher or lower, and the quickest way to find out is to run the segmentation described below.
The FCA's 2025 survey of advice firms is a useful reality check on the other side. It found IHT planning was the main objective for 5% of advised clients overall and 8% at small firms (FCA, published April 2026). That suggests IHT is more often a second question sitting on top of a retirement income or consolidation need than the main reason someone books in. That shapes how you should market it, which we come back to below.
Is consumer demand rising, or just spiking?
Spiking, on top of a higher baseline. The UK search data we pulled when planning this site shows the pattern (DataForSEO, September 2026):
| Month | UK searches for "inheritance tax on pensions" | What was happening |
|---|---|---|
| October 2025 | 14,800 | Run-up to the 26 November 2025 Budget |
| December 2025 | 9,900 | After the Budget and HMRC's policy paper |
| April 2026 | 4,400 | Finance Act 2026 enacted in March; the start date still a year away |
| 12-month average | 4,400 | Baseline |
The shape matters more than the size. Interest jumps on news and then settles at a baseline that's still high for a tax technicality. The next obvious trigger is the Autumn Budget on 28 October 2026, and after that, April 2027 itself, when HMRC publishes guidance and the first estates go through the new process.
The adviser surveys point the same way. In Transact's August 2025 survey of 260 advisers, 59% expected the IHT changes to increase demand for advice. Wesleyan's research, reported in April 2026, found 90% of advisers had seen clients accelerate drawdown ahead of the change, with 74% reporting typical increases of 5% to 15%. If those are the conversations you want more of, drawdown and retirement income appointments are one of the four types we book. Royal London reported a 50% rise in its whole of life sales in January 2026 amid more IHT advice enquiries, although it didn't attribute all of that to pensions.
A word of caution. Bought leads often include numbers that never pick up, or people who've already heard from four other firms, and a headline-driven spike carries the same risk: plenty of people want one quick answer and will never pay for advice. In aggregate the demand is there, but a firm needs a way to sort the planners from the worriers before they reach the diary.
Which clients are calling about pension IHT?
From the professional commentary and adviser surveys, six groups keep coming up. None of this is a measured ranking of enquiries, so treat it as a triage list rather than a forecast.
- Clients in their seventies with large untouched pensions. They followed the old logic (spend ISAs and cash, leave the pension) and now face the after-75 double charge.
- Unmarried couples. No spouse exemption, so the pension passing to a partner can be taxed on the first death. Forvis Mazars flagged this group early.
- People who built pensions as an inheritance vehicle. Large SIPPs, often topped up for the tax treatment rather than retirement income. The rationale for the strategy has changed.
- Business owners with property in a SIPP or SSAS. Commercial property in a pension raises valuation and liquidity questions when tax is due within six months. Armstrong Watson covered this in August 2026.
- Estates near £2m. Adding the pension can push an estate into the residence nil-rate band taper, so the effective cost of the change can be higher than 40% on the margin.
- Adult children and executors. Some calls come from the next generation or via solicitors, which is where the law-firm referral data above fits.
Notice what these groups have in common: they're older, wealthier and usually have more going on than one pension. That's why IHT tends to arrive as part of a wider retirement conversation.
How should you position an IHT-on-pensions review?
Carefully, and without promising an outcome. Your own adverts and web pages are financial promotions, so they have to be fair, clear and not misleading. The two mistakes to avoid are implying that every pension will be taxed, and implying that a meeting will save the client a fixed amount of tax. Both are easy to write in a hurry, and both invite questions from compliance.
A safer frame is a review of the whole retirement and estate picture, with the pension change as the trigger. Something like this, adapted and signed off by your compliance team:
The areas firms say they're covering in these reviews are well documented in the surveys and planning notes above. Transact found that 47% of advisers expected gifting from surplus income to play a bigger role, 33% whole of life or other protection, and 19% annuities. Canada Life found 72% of adults didn't know regular gifts from surplus income can be immediately exempt, which tells you how much explaining the first meeting will involve. The typical agenda:
- Nominations and expression-of-wish forms, and whether they still make sense
- The order of withdrawals across pensions, ISAs and other assets
- Gifting, including regular gifts from surplus income
- Life cover written in trust to fund a known bill
- Secure income versus drawdown, particularly approaching 75
- Coordinating with the client's solicitor on the will and the practical steps for personal representatives
The life cover point is worth pausing on. Whole of life cover written in trust is a protection product, and it's a reminder that pension IHT planning is often a team job: adviser, solicitor, sometimes a protection specialist.
A practical note on fees. An IHT question often turns up from someone who already has most of their money sorted. If your proposition is built around ongoing management, decide in advance whether you'll offer a one-off estate review and at what price. Otherwise you'll either turn good prospects away or do the work at a loss.
Do you have the capacity for it?
This is the question to ask before any marketing spend. Most firms will get pension IHT work from their existing clients first, and those clients have first call on your time.
The capacity data isn't comfortable. NextWealth's 2026 research found 49% of advisers personally serve more clients than a year earlier, with an average of 88 clients per adviser, and the lang cat's 2026 State of the Advice Nation flagged a capacity crunch, particularly in paraplanning (NextWealth; the lang cat). An IHT review is paraplanner-heavy work: valuations, cashflow modelling with and without the pension, and coordination with solicitors.
A sensible order to work through it:
- Segment the book. Which existing clients have pension-heavy estates above the nil-rate bands, and which are over 70 or unmarried? That's your first-priority list.
- Standardise the review. A template report and cashflow scenario set, so each review isn't built from scratch.
- Decide your appetite for new IHT-led clients. A minimum pension or estate size, and whether you'll take one-off work.
- Then fill the gaps. Only market for new clients once you know how many reviews a month the team can deliver.
If you're a sole adviser, the honest answer might be that your existing book will keep you busy until well after April 2027 (the capacity maths will tell you). That's fine. Buying new appointments into a full diary wastes money and annoys prospects.
Where do booked appointments fit?
For firms that do have room, the question is how to get the right prospects without chasing a headline-driven lead list. This is what we built InvestmentsBooked for, so we're not neutral here. Take this section as a description, not a recommendation.
Every InvestmentsBooked appointment is with a UK saver who self-declares £250k–£3m in defined contribution pensions (reconfirmed on the call) and has been told advice is paid for. The prospect asks us to book them with one FCA-authorised independent firm. We share their answers with that one firm only, and we tell them the firm's name and FRN as soon as it claims the booking, before the call. One of the help options on the booking form is passing my pension on / inheritance tax (the 2027 changes), and the brief you receive shows the client's age, home ownership, other investable assets band and whether a partner is joining. So you can see before the call whether someone is 58 and asking about consolidation, or 74 with a large pension and a question about their children. We don't advise, fact-find or suggest products: whether the client needs a review, and what it covers, is your call.
You pay £500 per qualified show (no VAT added). If they don't turn up, the credit comes back. The full show test and credit rules are on the pricing page, and how prospects are sourced and qualified is on lead quality. The IHT-specific version is described on inheritance tax planning appointments, and the wider process on how it works.
We don't quote InvestmentsBooked conversion figures. The rules for what counts as a qualified show, and what gets credited back, are on lead quality. If you'd like these appointments in your diary, the application takes a few minutes.
Two related changes are worth reading alongside this one: what targeted support means for IFA pipelines, and what the pensions dashboards deadline means for advisers. They arrive on different timetables, and it helps to know which is live now and which is still a year or more away.
Sources and checks. Law: Finance Act 2026 ss66–71 (Royal Assent 18 March 2026); HMRC technical note: Inheritance Tax on pensions (updated 29 May 2026). Estimates: HMRC policy paper and costing (26 November 2025); IHT receipts from HMRC's annual receipts bulletin. Budget date: HM Treasury (31 July 2026). Search volumes: DataForSEO Google Ads data, UK, pulled September 2026. Adviser surveys: Quilter (March 2025, 460+ IFAs), Transact (October 2025, 260 advisers), Wesleyan via IFA Magazine (April 2026), Royal London (January 2026), Canada Life (June 2026), NextWealth and the lang cat (2026). Death benefit income tax: GOV.UK. Client objectives: FCA 2025 advice firms survey (published 23 April 2026). The calculator and formula are illustrative. Figures checked 27 September 2026. InvestmentsBooked is not authorised by the FCA and does not give financial advice.