The short answer: a minority of estates, but a meaningful one. From 6 April 2027 most unused pension funds and death benefits will be counted as part of the estate for inheritance tax. HMRC estimates that around 10,500 estates a year will become liable for inheritance tax for the first time as a result, and a further 38,500 estates that would have paid anyway will pay more, by around £34,000 extra on average. Set against roughly 600,000 UK deaths a year, that is well under one in ten estates. Most people reading the headlines will not, in fact, be affected.
The people who are affected share a recognisable profile: a meaningful defined contribution pension pot, an estate already near or above the inheritance tax thresholds, and no surviving spouse or civil partner to leave the pension to. If you want a personal answer rather than a national statistic, our free pensions IHT 2027 estimator works out in about two minutes whether adding your pension to your estate is likely to create or increase a bill. This article covers England and Wales (inheritance tax itself applies UK wide) and is general information, not financial or legal advice.
What is actually changing, in one paragraph
Under current rules, most defined contribution pensions sit outside your estate for inheritance tax, because scheme trustees decide (usually following your nomination form) who receives the money. From 6 April 2027 that shelter largely ends: unused pension funds and death benefits will be included in the value of the estate, and personal representatives (your executors) become legally responsible for reporting and paying any inheritance tax due on them, as confirmed in the government's policy paper on inheritance tax on pensions. This page deliberately stays on the "who" question; for the full mechanics of the reform, see our companion guide to the 2027 pension inheritance tax changes, and for the underlying numbers, our data page on pensions and inheritance tax 2027.
The two groups HMRC expects to be affected
Coverage of this reform tends to quote a single combined figure of around 49,000 estates. HMRC's own impact assessment actually splits it into two quite different groups, and knowing which group you might fall into matters.
| Group | HMRC estimate (per year) | What it means |
|---|---|---|
| Newly liable estates | Around 10,500 | Would have paid no inheritance tax under current rules; the pension pushes the estate over the threshold for the first time |
| Estates paying more | Around 38,500 | Already over the threshold on non-pension assets; the pension increases an existing bill by around £34,000 on average |
Group one: newly liable. Typically someone whose house, savings and possessions sit just below their available thresholds, with a pension pot large enough to tip the total over. Think of a single homeowner with a £280,000 house, £30,000 of savings and a £150,000 pension: under £325,000 today, £460,000 from April 2027 if the home does not pass to direct descendants.
Group two: paying more. Nearly four times larger. These estates were paying inheritance tax anyway, so the pension simply adds to the taxable excess, usually at 40%. A £200,000 unused pension on top of an already taxable estate means roughly £80,000 of extra tax, which is how the average lands around £34,000 across a spread of pot sizes.
A three question self-check
Most people can get a good first answer without any calculation at all. Ask yourself, honestly, three questions.
- Do you have unused pension savings of a meaningful size? Mainly defined contribution pots (personal pensions, SIPPs, workplace DC schemes) with money likely to remain at death. A pension you expect to spend down in retirement, or a defined benefit pension paying a survivor's income, is far less of an issue.
- Is your estate near or above your thresholds before the pension is added? Everyone has a £325,000 nil-rate band, up to £175,000 of residence nil-rate band where a home passes to children or other direct descendants, plus anything transferred from a late spouse or civil partner. Our guide to the UK inheritance tax threshold walks through the bands in detail.
- Who will inherit the pension? Anything passing to a spouse or civil partner remains exempt. Pensions nominated to children, other relatives or an unmarried partner are where the 2027 change bites.
If you answered no to either of the first two questions, the 2027 change is unlikely to affect your estate. If you answered yes to all three, it is worth running your figures through the pensions IHT 2027 estimator and reading our fuller hub for pension holders preparing for 2027.
Who is most exposed
People who planned to leave their pension to children
The most common strategy affected by this reform is deliberately preserving the pension as an inheritance while spending other assets first, precisely because pensions sat outside the estate. Families who followed that logic, entirely reasonably under the old rules, often hold exactly the combination the new rules catch: a preserved pot plus a home already using up the thresholds. This group makes up much of the "paying more" 38,500.
Unmarried couples
There is no exemption for an unmarried partner. A pension nominated to a surviving cohabiting partner counts in the taxable estate from April 2027, with no spouse exemption and no transferred allowances. An unmarried couple can face tax on the first death where a married couple with identical assets would pay nothing.
Single people and the widowed with larger estates
Where there is no surviving spouse to inherit, everything passes straight to the next generation and is measured against the thresholds immediately. Widows and widowers do at least usually benefit from transferred allowances; see our guide to the married couples' thresholds and the residence nil-rate band for how those stack to £1,000,000.
Estates near the £2,000,000 taper point
A subtler group: adding the pension to the estate can push the total above £2,000,000, where the residence nil-rate band tapers away at £1 for every £2 of excess. These estates lose allowance as well as gaining taxable value, a double effect we cover in our guide to the RNRB taper and pension inheritance tax.
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Who is largely unaffected
- Most estates, full stop. The clear majority of estates fall below the thresholds even after pensions are added, and continue to pay nothing. Only around one in twenty deaths currently produces an inheritance tax bill; HMRC's assessment of the pension measure raises that share only modestly.
- Married couples and civil partners on the first death. The spouse and civil partner exemption continues to apply to pensions, so the change generally only matters on the second death. Our guide to pension IHT 2027 for married couples covers this case in depth.
- Death in service benefits. Lump sums paid because someone dies while employed, from a registered pension scheme, are excluded from the new charge. Details in our guide to death in service benefits and IHT 2027.
- People whose pension is an income, not a pot. A defined benefit pension that dies with you, or continues only as a taxable survivor's pension to a spouse, typically leaves no unused fund to bring into the estate.
One practical point for families that are affected
Where tax is due on a pension, the scheme can help pay it: up to 50% of the pension amount can be withheld by the scheme for up to 15 months to help fund the inheritance tax liability, under the payment mechanics set out in the government's consultation and response. That eases the cash flow problem for executors, though it does not reduce the bill itself, and it makes early, accurate pension information gathering a core part of the executor's job from 2027.
Does it matter whether you have already retired?
A question that comes up constantly: does the change only affect people still building their pension, or does it catch those already drawing one? The answer is that the stage of retirement is irrelevant; what matters is whether unused funds remain at death. Someone in flexi-access drawdown who dies at 80 with £120,000 still in the pot will have that £120,000 counted in their estate from 6 April 2027, exactly as a 55 year old who dies with an untouched pension would. Money already withdrawn and spent is gone from the pension, and money withdrawn and moved into savings has always been part of the estate anyway, so the reform does not change its treatment.
The date that matters is the date of death, not the date the pension was built up or nominated. Deaths before 6 April 2027 fall under the current rules; deaths on or after that date fall under the new ones. There is no grandfathering for existing pensions or existing nomination forms.
What affected families can usefully do now
Without straying into financial advice, three pieces of housekeeping are sensible for anyone whose self-check came back "possibly affected".
- List your pensions and get current values. Many people hold three or four forgotten workplace pots. Executors will need this information from 2027, and you can save them months by compiling it now.
- Check your nomination (expression of wish) forms. Who you have nominated determines whether the spouse exemption applies. Forms completed decades ago often still name a former partner or a parent.
- Recalculate your estate with pensions included. The estimator does this quickly, and where the total is materially over the thresholds, regulated financial advice on your options is the appropriate next step. Decisions about contributing to, withdrawing from or restructuring pensions are exactly the ones this site does not advise on.
Speak to a specialist
If your self-check suggests your estate could be caught, the numbers are worth getting right before April 2027, and decisions about pensions and estates justify regulated advice. We can connect you with a vetted estate planning specialist who deals with the 2027 rules daily; in the meantime, the free pensions IHT 2027 estimator gives you a clear starting figure to bring to that conversation.