Your pension is not legally part of your estate — which is why it cannot be covered by your will. Instead, who receives your pension benefits when you die is determined by a separate nomination you make directly with your provider. The rules on doing this tax-efficiently are about to change dramatically: from 6 April 2027, pension pots will be brought into inheritance tax for the first time. This guide explains the current rules, the upcoming changes, and exactly what you need to do now.

Table of Contents

• The Fundamental Rule: Why Your Pension Is Not in Your Estate
• The Expression of Wish: The Document That Actually Controls Your Pension
• What Happens to Your Pension When You Die: The Current Tax Rules
• The Age-75 Divide: Why the Date of Your Death Matters
• The Finance Act 2026: The April 2027 IHT Change
• Who Is Affected and Who Is Exempt from the New Rules
• The Double Taxation Risk After April 2027
• Defined Contribution and SIPP Pensions on Death
• Defined Benefit (Final Salary) Pensions on Death
• State Pension: What Happens When You Die
• Death-in-Service Benefits: The Exception That Remains Exempt
• How to Pass On Your Pension: A Step-by-Step Guide
• What the April 2027 Change Means for Your Estate Planning
• Conclusion: Act Now Before the Rules Change
• Frequently Asked Questions

The Fundamental Rule: Why Your Pension Is Not in Your Estate

The most common misconception in UK pension planning is that a pension can be passed on through a will in the same way as a bank account, a property, or an investment portfolio. It cannot. Your pension is not legally part of your estate. It sits outside your estate entirely, which has two significant consequences: it is not governed by your will, and it is (currently) not subject to inheritance tax.

The legal reason your pension sits outside your estate is rooted in the discretionary trust structure under which most pension schemes operate. Most pension providers retain what is called ‘discretion’ over who receives the death benefit — even if you have expressed a preference. The pension provider is not legally obliged to follow your nomination, though in practice they almost always do. It is this trustee discretion that prevents the pension from being classified as your personal property and therefore keeps it outside your taxable estate.

Unbiased.co.uk’s pension inheritance guide (last updated July 2026) explains the principle clearly: ‘Your pension isn’t legally part of your estate, so it is not covered by your will.’ This is not a technicality that can be resolved by including pension instructions in your will. It is a structural feature of how pension schemes are legally constituted in the UK. The only way to direct where your pension benefits go is through the mechanism the pension system has established specifically for this purpose: the Expression of Wish.

Your pension is NOT legally part of your estate and cannot be covered by your will (Unbiased July 2026; People's Pension; MoneyToTheMasses; Albert Goodman July 2026). Most pension providers retain 'discretion' over death benefit payments -- this discretion is the legal basis for the pension's exclusion from your estate and (currently) from IHT. Without an Expression of Wish: trustees must investigate beneficiaries, causing delays, and may require Grant of Probate (Albert Goodman July 2026). From 6 April 2027: unused pension pots will be brought INTO the estate for IHT purposes for the first time -- Finance Act 2026 has received Royal Assent (Albert Goodman; Mishcon de Reya; AJ Bell; Interactive Investor; Unbiased July 2026). 7 in 10 people die after age 75 (Albert Goodman July 2026). Death-in-service benefits remain IHT-exempt after April 2027.

The Expression of Wish: The Document That Actually Controls Your Pension

If your will does not control your pension, what does? The answer is a document called an Expression of Wish — also known as a Death Benefit Nomination Form, a Beneficiary Nomination, or an Expression of Wishes depending on your pension provider. It is a form you complete directly with your pension scheme that tells the trustees whom you would like to receive your pension benefits when you die.

The expression of wish is not legally binding. The trustees of the pension scheme retain final discretion over who receives the death benefit, and they are not obliged to follow your nomination. However, in the vast majority of cases, trustees do follow the expressed wishes of the scheme member, provided the nomination is up to date, clearly expressed, and the named beneficiaries are still alive and appropriate. The non-binding nature of the nomination is, paradoxically, the feature that keeps the pension outside your estate and outside inheritance tax — because if it were binding, it would function more like a legal asset and be treated differently for tax purposes.

You can nominate virtually any individual or organisation to receive your pension benefits: your spouse or civil partner, children, grandchildren, any other individual (not necessarily a family member), a trust, or a registered charity. You can split the pension between multiple beneficiaries in any proportions you choose (Albert Goodman July 2026; AJ Bell). The nominated beneficiaries typically have the option to receive their share as a lump sum or leave it in a pension drawdown account (AJ Bell).

The absence of an Expression of Wish creates a serious practical problem. Albert Goodman’s July 2026 pension planning guide states: ‘Without one, the Pension Scheme trustees must investigate who your beneficiaries are and may require Grant of Probate or Letters of Administration.’ This process takes time — potentially many months — during which beneficiaries receive nothing. Completing and keeping current an Expression of Wish is the single most important administrative act in pension death benefit planning.

Check your Expression of Wish immediately: contact your pension provider or log into your online pension account and verify (a) that you HAVE an Expression of Wish on file, (b) that the named beneficiaries are still the people you want, and (c) that the proportions reflect your current wishes. Review and update it after any major life change: marriage, divorce, separation, birth of a child, death of a named beneficiary. This is separate from your will -- updating your will does NOT update your Expression of Wish. Not financial advice.

What Happens to Your Pension When You Die: The Current Tax Rules

Under the rules currently in force (before 6 April 2027), the tax treatment of pension death benefits depends primarily on two factors: the type of pension you have, and whether you die before or after age 75. Understanding these two variables is the foundation of pension inheritance planning.

For defined contribution (DC) pensions, SIPPs, and most modern workplace pensions, the core principle is as follows. If you die and have not yet started drawing your pension, your pension pot is available to be distributed to your nominated beneficiaries. If you die before turning 75, the payment to beneficiaries is generally tax-free (no income tax on lump sums, provided the funds are designated within two years of death and within the Lump Sum and Death Benefit Allowance). If you die at or after age 75, any payments to beneficiaries are taxed at their marginal rate of income tax as they withdraw the money (AJ Bell; MoneyToTheMasses; Unbiased July 2026; Interactive Investor).

The current absence of inheritance tax on pension pots is the feature that has made pensions an increasingly powerful estate planning vehicle since the 2015 pension freedoms. Since 2015, financial advisers have commonly recommended that clients with an IHT problem draw on other assets first (ISAs, savings, investment portfolios) and preserve the pension pot for as long as possible, allowing it to be passed on outside IHT. This strategy has been particularly effective because unlike an ISA, which forms part of your estate and is subject to IHT, a pension pot under discretionary trust sits entirely outside the estate.

Current rules (before 6 April 2027): Pension pots sit OUTSIDE your estate and are NOT subject to IHT. Death before age 75: beneficiaries receive pension funds TAX-FREE (income tax-free on lump sums, subject to LSDBA). Death at or after age 75: beneficiaries pay income tax at their marginal rate on withdrawals. Trustees still retain discretion; Expression of Wish is advisory but almost always followed. These rules apply to defined contribution pensions, SIPPs, and most modern workplace pensions. State pension does NOT pass on (see Section 10). Sources: AJ Bell; MoneyToTheMasses; Unbiased July 2026; Interactive Investor; People's Pension 2026.

The Age-75 Divide: Why the Date of Your Death Matters

The age of 75 is the single most significant threshold in UK pension death benefit planning. It determines the income tax treatment of pension benefits paid to beneficiaries, and this distinction matters enormously for the financial planning of both the pension holder and the intended beneficiaries.

If you die before age 75: nominated beneficiaries can usually receive the pension funds entirely free of income tax. They may take the money as a lump sum or leave it in a pension drawdown arrangement, continuing to benefit from tax-free growth inside the pension wrapper. For a beneficiary who takes drawdown, the funds continue to grow tax-free and can be withdrawn over time, subject to their own income tax position as they draw down.

If you die at age 75 or older: the same options are available (lump sum or drawdown), but the tax treatment changes fundamentally. Any withdrawals the beneficiary makes from the inherited pension are taxed at their marginal rate of income tax — exactly as if the money were earned income. A beneficiary in the basic rate tax band pays 20% on withdrawals; a higher rate taxpayer pays 40%. This does not mean the money is lost — it means it is taxed as income in the year and proportion in which it is withdrawn. A beneficiary who manages their annual income carefully can phase withdrawals to stay within a lower tax bracket.

Albert Goodman’s July 2026 analysis of the post-2027 framework notes a critical statistical reality: seven in ten people will die after age 75. This means that for the majority of pension holders, the income tax on beneficiary withdrawals is not a hypothetical. It is the most likely outcome. The over-75 income tax rule, combined with the new IHT rule from April 2027, creates what Albert Goodman describes as the ‘double taxation’ risk — a scenario where pension funds are subject to both IHT and income tax.

The age-75 threshold has never been arbitrary. It originally aligned with the old Lifetime Allowance testing mechanism. Although the Lifetime Allowance was abolished from 6 April 2024 and replaced with the Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA), the age-75 rule for death benefit income tax treatment was retained. The LSDBA of £1,073,100 caps the total amount of tax-free lump sums that can be paid from all pension schemes combined on death before 75. Any amount above this allowance is taxed at the beneficiary's marginal rate even if death occurs before 75. Seek specialist advice if the combined value of all pensions is large. Not financial advice.

The Finance Act 2026: The April 2027 IHT Change

The Finance Act 2026 has received Royal Assent. From 6 April 2027, most unused pension funds and some pension death benefits will be included in the deceased’s estate for inheritance tax purposes. This is among the most significant changes to the UK pension landscape since the 2015 pension freedoms, and it fundamentally alters the estate planning calculus for anyone who has been treating their pension pot as an IHT-efficient legacy vehicle.

The announcement was first made in the October 2024 Budget and confirmed through the subsequent legislative process. Mishcon de Reya’s February 2026 briefing summarises the change precisely: ‘From April 2027, most unused pension funds and pension death benefits will be included in a person’s estate for inheritance tax (IHT), even if scheme administrators or trustees have discretion over payments.’ This last phrase is important: the fact that a pension is held under trustee discretion, which previously excluded it from the estate, will no longer be sufficient to exclude it from IHT.

For those who die on or after 6 April 2027, the pension pot will be added to the rest of the estate and subject to IHT at the standard rate (currently 40%) on the amount above the available nil rate band. The pension pot does not literally become ‘part of the estate’ in the legal sense — it remains under trustee control and will not go through probate in the traditional way. Instead, the pension scheme administrators will be responsible for reporting and paying any IHT due to HMRC, similarly to how other estate taxes are managed.

Upcoming Change (6 April 2027): From 6 April 2027 (Finance Act 2026 has received Royal Assent): Unused DC pension pots and most pension death benefits will be included in the estate for IHT. IHT rate: 40% on the amount above the available nil rate band. Standard nil rate band: £325,000. Residence nil rate band: £175,000 (where applicable). Combined threshold for married couple / civil partners: up to £1,000,000 before IHT applies. EXEMPT from new IHT rules: transfers to spouse, civil partner, and qualifying charities. NOT exempt (above nil rate band): children, grandchildren, cohabitees, and trusts. Death-in-service benefits: remain IHT-exempt. The pension scheme administrators (not the personal representatives) will report and pay IHT on pension pots. Sources: Albert Goodman July 2026; Mishcon de Reya February 2026; AJ Bell; Interactive Investor; Unbiased July 2026.

Who Is Affected and Who Is Exempt from the New Rules

Not every pension inheritance will be affected by the April 2027 IHT change. Understanding the exemptions is critical to evaluating whether your estate planning needs to change and how urgently.

The most important exemption is the spousal and civil partner exemption. Transfers of pension death benefits to a surviving spouse or civil partner will remain completely exempt from IHT — the same as the current spousal IHT exemption that applies to other assets. If your pension passes to your spouse on your death, there is no IHT regardless of the size of the pension pot. This exemption applies to spouses and civil partners only — cohabiting partners who are not married or in a civil partnership do not qualify, which is a significant planning consideration for couples who have chosen not to formalise their relationship legally.

Qualifying charities also remain exempt. If you nominate a registered charity to receive all or part of your pension, those funds will not be subject to IHT even after April 2027. This is consistent with the existing IHT charitable exemption that applies to other estate assets.

The most affected beneficiaries under the new rules are children and grandchildren. Albert Goodman’s July 2026 briefing is explicit: ‘Transfers of death benefits above the available nil rate band to children, grandchildren, cohabitees and trusts will not be exempt.’ For a person with a pension pot of, say, £500,000 and no other estate assets, the first £325,000 (nil rate band) would be covered and the remaining £175,000 would be subject to 40% IHT = a £70,000 tax bill on the pension alone. If there are other estate assets (property, ISAs, savings) that have already consumed the nil rate band, the entire pension pot could be subject to 40% IHT.

Most estates will not be affected. AJ Bell notes that ‘the majority of people will not fall into IHT, even after the changes come into force.’ The combined nil rate band and residence nil rate band for a married couple or civil partnership can reach £1 million before IHT applies. But for those with larger pension pots, multiple properties, or other significant assets, the April 2027 change materially changes the estate planning picture.

The Double Taxation Risk After April 2027

The most concerning consequence of the April 2027 change for beneficiaries over 75 is the double taxation risk. This arises because two separate tax charges can apply to the same pension funds when the pension holder dies at or after age 75 after 6 April 2027.

The first charge is IHT, applied to the pension pot as part of the estate at 40% on the amount above the nil rate band. The second charge is income tax, applied to the beneficiary at their marginal rate when they withdraw money from the inherited pension. Albert Goodman’s July 2026 briefing identifies this directly: ‘One consequence of the new rules is the risk of double taxation where death occurs from age 75, as income tax also applies to withdrawals taken out by the beneficiaries.’

To illustrate the potential impact: a pension pot of £500,000 inherited by a child, where the nil rate band has been consumed by other estate assets, could face IHT of £200,000 (40% of £500,000). The remaining £300,000 inside the inherited pension would then be subject to income tax at the beneficiary’s marginal rate as they withdraw it — potentially another 20–40% depending on their income. The combined tax cost could reduce the £500,000 pension by £260,000 to £380,000, leaving the beneficiary with only £120,000 to £300,000.

The double taxation scenario (IHT + income tax on withdrawals post-75) represents the most significant planning challenge created by the April 2027 change. It specifically affects: beneficiaries who are not spouses or civil partners (children, grandchildren, cohabitees); deaths occurring at or after age 75; estates where the nil rate band has already been used by other assets. Strategies to mitigate: drawing down the pension during lifetime to reduce its size; gifting from pension withdrawals (subject to the 7-year potentially exempt transfer rule); reviewing nominated beneficiaries to include more low-rate-taxpayer beneficiaries who can draw down the inherited pension efficiently; considering pension-to-charity nominations for the IHT-exempt element. Always seek advice from a qualified IFA and solicitor. Not financial or tax advice.

Defined Contribution and SIPP Pensions on Death

The defined contribution (DC) pension is the most common type of pension for workers who joined a scheme after the mid-1980s. DC pensions include personal pensions, SIPPs (Self-Invested Personal Pensions), stakeholder pensions, and most modern workplace pensions. In a DC pension, the pension pot is a specific, identifiable sum of money that belongs to a member account and can be passed to nominated beneficiaries on death.

Interactive Investor’s pension inheritance guide summarises the DC position: ‘You can leave your SIPP to a person(s) or charitable organisation(s) of your choice. They will have the option to take your remaining pension either as a lump sum or via drawdown.’ The choice between lump sum and drawdown has significant tax implications for the beneficiary. Taking a large lump sum in a single tax year can push the beneficiary into a higher income tax bracket. Taking the money as drawdown allows the inherited pension to remain invested and growing tax-free, with withdrawals taken at a manageable pace to minimise the income tax hit.

For SIPP holders specifically, AJ Bell notes the current position clearly: ‘Your pension pot can currently be passed on, free of inheritance tax, to your beneficiaries when you die. From 6 April 2027, unused pension pots and some death benefits will be included in the value of your estate for inheritance tax purposes.’ The beneficiaries of a SIPP holder who dies before age 75 currently receive the entire pension pot tax-free. After age 75, they pay income tax on withdrawals. Post-April 2027, both IHT (for non-exempt beneficiaries) and income tax on withdrawals (post-75) will apply.

The People’s Pension guide adds a practical clarity on the will question: ‘Currently, you do not need to include your pension in your will if you have named your beneficiaries. If you have not named a beneficiary, having a will can help Trustees determine who to pay.’ This reinforces the fundamental message: the Expression of Wish is the controlling document, not the will. The will is, at best, a fallback signal to the trustees when no nomination exists.

Defined Benefit (Final Salary) Pensions on Death

Defined benefit (DB) pensions, also called final salary pensions, operate differently from DC pensions and have more variable inheritance rules. A DB pension pays a guaranteed income in retirement based on salary and years of service rather than a pot of accumulated savings. This means there is no ‘pot’ to leave to beneficiaries in the way a DC pension has.
What DB pension survivors can receive depends on the specific scheme rules, which vary significantly between schemes. The most common provisions are: a reduced spouse’s or civil partner’s pension (often 50% of the member’s pension) paid for the rest of the survivor’s life; a dependent child’s pension paid until the child reaches adulthood; and a lump sum death benefit if the member dies before retirement or within a guaranteed payment period.

MoneyToTheMasses’ pension death guide notes: ‘A defined benefit pension will typically be a pension provided by an employer where the pension received in retirement will depend on your salary and length of service. If you die before you start drawing your pension a reduced pension will be payable to your spouse, partner or children.’ If you die in retirement during a guaranteed payment period (say, a 5-year guarantee), payments continue to a beneficiary for the remainder of that period. After the guarantee period, most DB pensions provide only the survivor’s pension for the spouse or civil partner, with nothing passing to other beneficiaries.

The April 2027 IHT changes also affect DB death benefits, though the mechanism differs from DC pensions because there is no identifiable pot. Schemes will need to determine how the new IHT rules interact with their specific benefit structures, and professional advice is particularly important for DB scheme members given this complexity.

State Pension: What Happens When You Die

The State Pension does not pass to beneficiaries. In the large majority of cases, State Pension payments stop completely when the recipient dies. The People’s Pension guide states plainly: the State Pension ‘stops with an individual’s death and cannot be inherited.’ This is one of the clearest distinctions between the State Pension and private pension arrangements.

There are limited exceptions. Unbiased’s July 2026 guide notes that ‘a spouse or civil partner will continue receiving some payments’ in specific circumstances: a portion of any Additional State Pension (accrued under the old system before April 2016) or protected payments may be passed on, but this depends on when the couple married and whether State Pension age was reached before or after April 2016 when the new State Pension replaced the basic State Pension. These inherited amounts are typically modest and subject to detailed HMRC rules.

Under the New State Pension (for those who reached State Pension age on or after 6 April 2016), there is generally no surviving spouse’s benefit. The full New State Pension of approximately £221.20 per week (2024-25 rate; check current rate at GOV.UK) is a personal entitlement that ends at death. This is a significant difference from the old basic State Pension system, under which some survivors’ benefits were available.

For estate planning purposes, the State Pension should be treated as income for life only, with no inheritance value. It reinforces the importance of private pension and other savings for anyone who wishes to leave a financial legacy to family members.

Death-in-Service Benefits: The Exception That Remains Exempt

Death-in-service benefits are a separate and important category of pension-related benefits that follow different rules from the main pension pot. When an employer provides death-in-service cover, it typically pays a lump sum of up to four times the employee’s annual salary to a nominated beneficiary if the employee dies while employed. This benefit is funded through a registered group life assurance scheme, and it is distinct from the employee’s pension contributions.

The critical distinction for the April 2027 changes: death-in-service benefits remain exempt from IHT even after 6 April 2027. Mishcon de Reya’s February 2026 briefing confirms: ‘Death in service benefits from both discretionary and non-discretionary registered pension schemes will remain exempt from IHT.’ MoneyToTheMasses similarly notes that the death-in-service benefit is tax-free before age 75.

Under current rules, death-in-service benefits are tax-free if the employee is under 75 at death. If the employee is over 75, the benefit is taxed at the recipient’s marginal rate of income tax. The post-April 2027 IHT exemption for death-in-service benefits provides a continued planning opportunity: for employees still in active service, the death-in-service lump sum provides an IHT-free inheritance vehicle even after the pension pot itself becomes IHT-subject.

The nomination mechanism for death-in-service benefits is similar to pension nominations: the employee completes a nomination form directly with the scheme administrator naming who should receive the benefit. This nomination operates independently of the employee’s will and pension Expression of Wish. Employees should ensure all three documents (will, pension Expression of Wish, death-in-service nomination) are up to date and consistent with their current wishes.

How to Pass On Your Pension: A Step-by-Step Guide

Passing on your pension effectively requires a sequence of specific actions that many pension holders have never completed. Here is a practical guide to the essential steps:

• Step 1 — Locate all your pension schemes: identify every pension you have — current workplace pension, old employer pensions, personal pensions, SIPPs, any pension traced through the government’s free Pension Tracing Service (gov.uk/find-pension-contact-details). Different schemes have separate Expression of Wish processes. A nomination with one provider does not cover another.
• Step 2 — Complete (or update) an Expression of Wish with each provider: contact each pension provider and request their Expression of Wish / Death Benefit Nomination Form. Complete it naming your chosen beneficiaries and the proportions for each. You can name multiple people and divide the pension in any split you choose (e.g. 50% spouse, 25% each to two children).
• Step 3 — Choose your beneficiaries carefully given the post-April 2027 rules: under the new IHT framework from April 2027, nominating a spouse or civil partner remains IHT-exempt. Nominating children or grandchildren will expose the relevant portion to IHT. Consider whether nominating a low-rate-taxpayer beneficiary (who can draw down the inherited pension over many years at a lower income tax rate) reduces the overall tax burden.
• Step 4 — Consider lump sum versus drawdown for beneficiaries: beneficiaries who inherit a DC pension or SIPP typically have the option to take the money as a lump sum or to keep it invested in a pension drawdown arrangement. Drawdown allows the inherited pension to remain in the tax-free wrapper and be withdrawn in manageable amounts over time. For post-75 deaths where income tax applies to withdrawals, spreading withdrawals across multiple tax years reduces the tax rate. Consider discussing this option with beneficiaries in advance.
• Step 5 — Keep your nominations current: review your Expression of Wish after every significant life change: marriage, divorce, birth of a child or grandchild, death of a named beneficiary, change in your financial circumstances. An Expression of Wish that names a former spouse or a deceased person may not produce the outcome you want, even if the trustees use their discretion sympathetically.
• Step 6 — Seek professional advice before April 2027: if your estate is likely to exceed the relevant IHT thresholds (including your pension pot under the new rules), the April 2027 change is a significant planning event. Strategies including pension drawdown during lifetime, lifetime gifting from pension income, charitable nomination, and review of overall estate structure may all be relevant. An independent financial adviser and a solicitor working together can model the specific impact for your circumstances.

What the April 2027 Change Means for Your Estate Planning

The April 2027 IHT change requires anyone who has been using their pension as an estate planning tool to reconsider their strategy. Albert Goodman’s July 2026 briefing captures the strategic shift: ‘Since 2015, it’s made sense for people with an IHT problem to build up their defined contribution pension, leaving it untouched for as long as possible to treat it as a legacy asset. Leaving the pension pot until ‘last’ meant it could potentially be passed on death free of IHT. From 6 April 2027 it’s no longer tax efficient to use a defined contribution pension pot as an inheritance tax-planning vehicle.’

This reversal in the optimal drawdown sequence is the most immediately actionable consequence of the change. Before April 2027, the financially rational strategy for those with IHT concerns was to draw down taxable investments (ISAs, savings, investment portfolios) first and preserve the pension last, because the pension sat outside IHT. After April 2027, Unbiased’s July 2026 guide suggests that ‘doing the opposite could become more popular so loved ones don’t get hit with a steep tax bill’ — meaning drawing on the pension earlier and preserving ISAs and other assets that receive a different tax treatment.

The specific strategies that financial advisers will be considering for clients post-April 2027 include: drawing down the pension earlier during retirement to reduce the pension pot at death; using pension income to make lifetime gifts (potentially exempt transfers if the donor survives 7 years); nominating spouses first (to use the IHT-exempt transfer) and then allowing the spouse’s estate plan to determine the next step; considering whether charitable bequests from the pension can reduce the IHT exposure; and reviewing life assurance policies to cover the projected IHT liability.

Conclusion

There are two things anyone with a pension needs to do right now. The first is immediate and costs nothing: contact each pension provider and verify that you have a current, accurate Expression of Wish on file. This single action ensures that the people you want to receive your pension benefits have the clearest possible path to doing so, without delays, without trustee uncertainty, and without the risk of the pension being distributed in a way you did not intend.

The second is more strategic and will depend on your specific financial circumstances: review your estate plan in light of the Finance Act 2026 and the April 2027 IHT changes. If your estate — including your pension pot for the first time — is likely to exceed the available nil rate band thresholds, the change from April 2027 may significantly increase the IHT exposure your beneficiaries face. An IFA and a solicitor working together can model the impact and recommend a revised drawdown and gifting strategy before the new rules take effect.

The fundamental logic of pension inheritance has not changed: your pension does not go through your will, it passes through your pension provider’s nomination process, and the trustees retain discretion over the final distribution. What has changed, from April 2027, is that the pension pot is no longer automatically outside inheritance tax. For most estates below the combined nil rate thresholds, this may not change much. For those with larger pensions and estates, it is the most significant pension planning development since 2015. Not financial or legal advice — always seek professional guidance from a qualified independent financial adviser and solicitor.

Frequently Asked Questions

Can I leave my pension in my will?

No. Your pension is not legally part of your estate and cannot be covered by your will. It sits outside your estate because most pension providers retain discretionary trust powers over the death benefit, which prevents the pension from being classified as your personal property for will and estate purposes. To direct where your pension goes when you die, you must complete a separate document called an Expression of Wish (also called a Death Benefit Nomination or Beneficiary Nomination Form) directly with each pension provider you have. Although the Expression of Wish is not legally binding — the trustees retain final discretion — providers almost always follow it in practice. If you have no Expression of Wish on file, the trustees must investigate who your beneficiaries are, which can cause significant delays and may require Grant of Probate or Letters of Administration. Having both an up-to-date will and an up-to-date Expression of Wish is best practice, but they serve different functions. Sources: Unbiased (July 2026); Albert Goodman (July 2026); People's Pension; MoneyToTheMasses. Not legal advice.

What happens to a pension when someone dies?

What happens to a pension when someone dies depends on the type of pension. For a defined contribution (DC) pension or SIPP: the pension pot is paid to the nominated beneficiaries named in the Expression of Wish. If death occurs before age 75: the payment is generally tax-free (income tax-free on lump sums, subject to the Lump Sum and Death Benefit Allowance). If death occurs at or after age 75: beneficiaries pay income tax at their marginal rate on withdrawals. From 6 April 2027: unused DC pensions will also be subject to inheritance tax for non-exempt beneficiaries (children, grandchildren, cohabitees, trusts). For a defined benefit (final salary) pension: typically pays a reduced survivor’s pension to a spouse, civil partner or dependent, and possibly a lump sum death benefit, depending on scheme rules. For the State Pension: stops at death and cannot be inherited, with very limited exceptions for some Additional State Pension in specific circumstances. Death-in-service benefits (separate from the pension pot): generally paid tax-free before age 75, remain IHT-exempt from April 2027. Sources: AJ Bell; MoneyToTheMasses; Unbiased July 2026; People's Pension; Albert Goodman July 2026. Not financial advice.

Will my children have to pay inheritance tax on my pension from April 2027?

From 6 April 2027, it depends on the size of your overall estate including the pension pot. Under the Finance Act 2026 (which has received Royal Assent), unused DC pension pots will be included in the estate for IHT purposes on deaths occurring on or after that date. Transfers to a spouse or civil partner remain IHT-exempt. Transfers to children, grandchildren, cohabitees, or trusts will be subject to IHT on amounts above the available nil rate band. The standard nil rate band is £325,000 and the residence nil rate band adds up to £175,000 where applicable. Married couples and civil partnerships can combine allowances, providing up to £1 million before IHT applies. If the combined estate (including pension pot) is below the relevant threshold, no IHT is due. If it exceeds the threshold, the excess will be taxed at 40%. For post-75 deaths, beneficiaries will also pay income tax on withdrawals from the inherited pension, creating a potential double taxation scenario. AJ Bell notes that the majority of people will not fall into IHT even after the changes. However, anyone with significant pension pots and other assets should seek advice well before April 2027. Sources: Albert Goodman July 2026; Mishcon de Reya February 2026; AJ Bell; Unbiased July 2026. Not tax advice.

What is an Expression of Wish and do I need one?

An Expression of Wish (also called a Death Benefit Nomination, Beneficiary Nomination, or Expression of Wishes) is a form you complete with your pension provider telling the scheme trustees who you would like to receive your pension benefits when you die. It is not legally binding — the trustees retain discretion over the final payment — but providers almost always follow it. You can nominate any individual (family member or otherwise), multiple people in any proportions, a charity, or a trust. Your nominated beneficiaries can usually choose to receive the benefit as a lump sum or leave it in pension drawdown. Yes, you need one — ideally one for every pension you have. Without it, trustees must investigate who your beneficiaries are, which can cause significant delays and may require Grant of Probate. Your will does not substitute for an Expression of Wish. Review and update it after any major life change. Sources: Albert Goodman July 2026; AJ Bell; People's Pension; MoneyToTheMasses. Not legal advice.

Does the State Pension pass to my spouse or children when I die?

Generally, no. The State Pension stops at death and cannot be inherited. Unbiased’s July 2026 guide confirms: ‘In most cases, payment of your state pension will stop completely when you die, and will not pass to your spouse.’ There are limited exceptions under the old State Pension system: a spouse or civil partner may inherit a portion of any Additional State Pension (built up under the pre-April 2016 system) or protected payments. Whether this applies depends on when you married and whether you and your partner reached State Pension age before or after April 2016. Under the New State Pension (applicable to those who reached State Pension age on or after 6 April 2016), there is generally no surviving spouse’s benefit. State Pension entitlement is a personal benefit for life. This makes private pension provision, ISAs, and other savings the primary vehicles for leaving a financial legacy to family. Sources: People's Pension; Interactive Investor; Unbiased July 2026. Not financial advice.