Are pensions subject to inheritance tax?

For deaths before 6 April 2027, money left in most pensions passes outside your estate and carries no inheritance tax. For deaths on or after that date, unused pension funds and lump sum death benefits count as part of your estate.

Get a complimentary health check Talk to an adviser

What the old position was

Until 6 April 2027, a pension held in a scheme where the trustees decide who receives the money sits outside your estate. No inheritance tax is charged on it. That is why a pension has been treated as the last thing to spend and often the best thing to leave.

A small number of schemes, mostly older public sector ones where the payment is not discretionary, were already inside the estate. The new rule removes that difference by bringing almost everything inside.

What is caught from April 2027

Unused defined contribution money: Whatever is left in a personal pension, a SIPP, a workplace money purchase scheme or a drawdown pot, and available to pay death benefits.
Defined benefit lump sum death benefits: The lump sum a final salary scheme pays on death, and scheme continuation payments.
Discretionary and non-discretionary alike: It no longer matters whether the trustees choose who receives the money.
Overseas and older schemes: Qualifying non-UK pension schemes and certain pre-1970 employer schemes are covered by the same rule.

What is excluded

Death in service benefits paid through a registered scheme because you died while employed.
Anything left to a spouse or civil partner, under the normal spousal exemption, and anything left to a registered charity.
Dependants' scheme pensions, and a dependant's or nominee's annuity bought at the same time as your own lifetime annuity.
A trivial commutation lump sum death benefit that extinguishes a dependant's scheme pension.

The rule applies to deaths on or after 6 April 2027, whenever the pension money is paid out.

Pensions and inheritance tax from April 2027

From 6 April 2027 the money left in your pensions when you die counts as part of your estate for inheritance tax.

Email me the guide

Calculators

Inheritance tax on pensions calculator

Enter your estate and your pensions to compare the inheritance tax on a death before 6 April 2027 with a death on or after it.

Work it out →

All calculators

Where this fits

Whether the April 2027 change affects you depends on the size of your estate and who you leave it to, and we can work that out with you.

Pensions and inheritance tax Get a complimentary health check

The advisers for this subject

Sunny Bharj

Independent Financial Adviser

Tony Springer

Independent Financial Adviser

Advising through Equity & General Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority. Check the firm on the FCA register under number 474163.