Inheritance Tax (IHT) changes and your pension
How pensions are currently treated
At the moment, money held in most UK pension schemes does not usually form part of your estate when you die. This means it is not normally subject to inheritance tax (IHT).
What is changing from April 2027
From 6 April 2027, most unused pension savings and lump‑sum death benefits will be included as part of a person’s estate for inheritance tax purposes. This means that, depending on the overall value of your estate and who you leave benefits to, inheritance tax could apply to pension savings in the future (there are some exceptions where benefits are expected to remain outside the scope of IHT).
A reminder about inheritance tax
Inheritance tax is a tax that may be payable when someone dies, but only if the total value of their estate is above the tax‑free allowance.
- The current standard IHT allowance is £325,000
- This may be higher if you leave your home to children or grandchildren, or if allowances are transferred between spouses or civil partners
- Assets that move from a person to their legal spouse or civil partner are exempt from IHT
- IHT is usually charged at 40% on the value above the allowance
Your estate includes things like property, savings, and personal belongings. From April 2027, it is expected to also include most unused pension savings and lump‑sum pension death benefits.
What happens next
The government and HM Revenue & Customs have already published initial policy papers and draft proposals, but some practical details are still being finalised, including how inheritance tax will be reported and paid in relation to pensions. We will be considering the implications for benefits that may be paid from the Kimberly-Clark Pension Scheme and will provide further details about this in due course.
