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By Mike Hardy, Abacus Advice Wills & Estates. October 2026.
For years, most pension savings sat outside your estate for inheritance tax. That changes on 6 April 2027. From that date, most pension money you have not used by the time you die will count as part of your estate, alongside your home, savings and investments.
What is changing
Unused pension funds and most lump sums paid out on death will be added to your estate when inheritance tax is worked out.
Death-in-service benefits from an employer's scheme are not caught.
Anything left to a husband, wife or civil partner is still free of inheritance tax, as it is now.
Your executors, not the pension company, will be responsible for reporting the tax and paying it.
Why this matters for your will
More estates will pay tax. Each person can usually leave £325,000 free of inheritance tax, plus up to £175,000 more if a home passes to children or grandchildren. Add a pension fund, and many families who never expected a tax bill may now face one.
The extra home allowance can be lost. That extra £175,000 starts to shrink once an estate is worth more than £2 million, and from 2027 a pension fund counts towards that figure.
Your executors' job gets harder. They will need values from each pension scheme, work out the tax and may have to pay it before money can be released. Choosing the right executors, and making sure they know what you hold, matters more than ever.
Trusts in your will may need another look. Many couples have wills with life interest or discretionary trusts written under the old rules. They may still be right, but the numbers behind them have changed.
Your pension nomination and your will should agree. Your pension scheme decides who receives your pension, guided by your nomination form, not your will. If the two point in different directions, the tax can fall in the wrong place.
What to do now
Find your will and check when it was written.
List your pensions and when you last updated the nomination form for each one.
Book a free chat. I will look at your will and your estate as a whole, tell you whether anything needs changing, and tell you the fixed fee before you commit.
If a decision about the pension itself is needed, such as taking more income or changing how it is held, that is regulated financial advice. I can arrange it through our sister firm, Abacus Advice Ltd, which is authorised and regulated by the Financial Conduct Authority.
This article reflects the rules as announced in October 2026. HMRC is still finalising some details, and it is general information, not advice on your own circumstances.
Written by Mike Hardy DipFA, Abacus Advice Wills & Estates, Tunbridge Wells.
Prefer to talk? Call Mike on 01892 320449 or email mike@abacuswills.co.uk
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