Worried about the April 2027 pension inheritance tax change? Chat to Caira by Unwildered before you make a rushed decision. Caira is powered by AI and backed by more than 10,000 legal documents for England and Wales. She can read pension statements, wills, letters from providers, HMRC notes and family instructions, then help you draft clearer questions for your adviser, executor or family.

What Are The Proposed Pension Changes In 2027?

Strictly, this is no longer only a proposal.

From 6 April 2027, most unused pension funds and pension death benefits will be brought into a person's estate for inheritance tax purposes.

In plain English, a SIPP or defined contribution pension that used to sit outside the inheritance tax calculation may now be counted when HMRC works out whether inheritance tax is due.

HMRC published a technical note on 11 May 2026 explaining how the system is intended to work. It says the change applies to deaths on or after 6 April 2027. If someone dies before that date, the current rules apply even if the pension benefits are paid out afterwards.

The tax is still not charged on every pension. It depends on the estate, the type of pension benefit, who receives it, and whether exemptions apply. That is why the best preparation is usually not "empty the pension immediately". It is to understand the family picture.

The Short Version

Who May Be Worst Affected?

The families most exposed are not always the richest. Sometimes it is the household that has done everything "sensibly": paid into a pension, kept spending modest, and planned to leave the house and pension to children.

Who May Be Least Affected?

Some people will read the headlines and worry when the practical effect may be modest.

How Do You Give Your Pension Away Before The 2027 Raid?

This is one of the easiest places to make a mistake.

You normally cannot simply "give away" a pension pot as if it were a bank account. You may be able to withdraw money from the pension, pay income tax where due, and then make lifetime gifts. But that is not the same as gifting the pension itself.

The main routes people are discussing are:

• drawing more pension income and gifting surplus income regularly;

• taking taxable withdrawals and making lifetime gifts;

• using the normal expenditure out of income exemption where it genuinely applies;

• using annual gift exemptions and small gifts;

• using life insurance written in trust to create a fund for inheritance tax;

• leaving more to a spouse, civil partner or charity where that fits the family plan;

• spending the pension for retirement rather than preserving it for inheritance.

None of these is automatically right. A person who withdraws £100,000 from a pension may create an income tax bill now, increase their estate if they do not give it away properly, and reduce their retirement security. That can be worse than doing nothing.

Possible Ways To Prepare

1. Find every pension first

Executors will need to know what exists. That means old workplace pensions, SIPPs, drawdown accounts, annuities, death in service arrangements and any non-UK pension schemes.

Make a short pension register:

• provider name;

• policy or plan number;

• current value;

• type of pension;

• nominated beneficiaries;

• whether it includes death in service;

• contact details for the provider;

• where statements are stored.

Caira by Unwildered can help organise this. Upload pension statements and ask Caira to produce a simple pension register and a list of missing details to request from providers.

2. Check your expression of wish forms

An expression of wish form tells pension trustees who you would like to receive the death benefits. It does not replace a will, but it matters. If your will says one thing and your pension nomination says another, your family may be left trying to untangle intention, tax and fairness at the worst possible time.

Check it especially after marriage, divorce, separation, a new partner, a child, a falling out, or the death of a named beneficiary.

3. Revisit the will, not just the pension

The pension may now affect the estate calculation, so the will needs to make sense with the pension. For example, a will that leaves the house to one child and the pension to another may no longer produce the balance the parent imagined.

Blended families need extra care. A surviving spouse may need security, but children from a previous relationship may fear being left out. A calm plan written down now can prevent suspicion later.

4. Think about drawdown order

Before 2027, many people were told to spend ISAs and cash first and preserve the pension because it was inheritance-tax efficient. That rule of thumb may no longer work.

Some families may consider spending more from the pension and preserving ISA or other assets instead. But the right order depends on income tax, investment risk, care needs, age, health, spouse position and family goals.

5. Consider gifts from surplus income

HMRC has specifically been asked whether the normal expenditure out of income exemption can apply to lifetime transfers made from funds withdrawn from a pension. The technical note says the pension changes do not alter the existing position: the exemption depends on the facts.

That means the gift must form part of normal expenditure, be made out of income, and leave the person with enough income to maintain their usual standard of living.

This can be powerful, but records matter. Keep bank statements, pension income records, notes of the pattern, and evidence that the donor could still live normally after the gifts.

6. Build liquidity for the executors

One fear in forums is simple: "Who actually pays the tax if the pension has not been released?" HMRC's process allows withholding and direct payment mechanisms, but families should still plan for cash flow.

Life insurance written in trust is one option some families explore. Others keep enough accessible cash or agree how tax will be funded. The point is not to create a perfect tax plan. It is to reduce the risk of the executor being trapped between HMRC, a pension scheme administrator and upset beneficiaries.

7. Do not forget care, benefits and family reality

Tax planning that leaves an older person short of money is not good planning. Large withdrawals or gifts may affect care-fee assessments, means-tested benefits, investment choices and family relationships.

If a child is pushing for a gift, pause. If a parent is frightened by a video and wants to empty the pension immediately, pause. A short delay to map the facts can save a very expensive mistake.

Examples

Example 1: The careful widower

David, 78, lives in Bristol. His home is worth £520,000. He has £120,000 in savings and a SIPP worth £430,000. He planned to leave the pension to his two adult daughters because he was told pensions were outside inheritance tax.

From April 2027, the unused SIPP may be counted for inheritance tax. David does not need to panic, but he should check his will, expression of wish form, likely nil-rate bands, and whether he is drawing enough pension for his own life. He might decide to spend more from the pension, make regular gifts from genuine surplus income, or keep more accessible cash for the executors.

Example 2: The unmarried couple

Maya and Tom live together in Manchester. They are not married or in a civil partnership. Tom has a workplace pension and a SIPP. He assumes Maya will be treated like a spouse if he dies.

That assumption can be dangerous. Cohabiting partners do not automatically receive the spouse or civil partner inheritance tax exemption. Tom should check the pension nomination, make a will, and think about whether Maya would have enough money while the estate is administered.

Example 3: The high-net-worth family

Anita has £8 million in investments, £3 million in business interests, a London home, an overseas property and a £2.5 million SIPP. She wants wealth to pass to children, stepchildren and grandchildren.

For Anita, the pension change is one part of a wider plan. Business relief, residence nil-rate band tapering, trusts, non-UK assets, charity gifts, lifetime gifts and pension death benefits all need to be considered together. A one-line answer from a video will not be enough.

What Questions Are People Asking Online?

The public comments and forum themes are very practical. People are not only asking "what is the law?" They are asking:

• Should I stop paying into my pension?

• Should I draw the pension before 2027?

• Will my children pay both inheritance tax and income tax?

• What happens if I die before April 2027 but the pension pays out later?

• Does this apply to a pension already being paid to a dependant?

• Can a SIPP be released early to pay the inheritance tax?

• Will my executor have to chase every old workplace pension?

• Is a joint life annuity safer?

• Does death in service still work?

• Should I buy life insurance in trust?

• Is this unfair if I saved carefully and did not spend much?

Those are reasonable fears. The answer is usually not one trick. It is a better map.

How Much Will The State Pension Increase In 2026-2027?

This search appears near the pension inheritance tax questions, but it is a different issue.

For 2026/27, the full new State Pension rate is £241.30 a week. The old basic State Pension Category A or B rate is £184.90 a week. Your actual amount can be lower or higher depending on your National Insurance record, protected payments, additional pension and deferral.

The State Pension is income paid during life. There is no unused State Pension pot to pass to children in the same way as a SIPP. The April 2027 inheritance tax change is mainly about unused pension funds and pension death benefits, not the ordinary State Pension increase.

If your retirement income depends mostly on the State Pension and a small workplace pension, the headline may be less relevant than it sounds. If you have a large defined contribution pension, drawdown pot or SIPP, it deserves closer attention.

A Simple Preparation Checklist

• List every pension and get current values.

• Check who is nominated on each pension.

• Review your will and lasting powers of attorney.

• Estimate the estate with and without the pension included.

• Check whether spouse, civil partner or charity exemptions may apply.

• Think carefully before large withdrawals.

• Keep evidence for gifts from surplus income.

• Consider whether executors will have enough cash to pay tax.

• Tell executors where documents are kept.

• Review the plan again when final HMRC guidance and tools are published before April 2027.

How Caira Can Help

Caira by Unwildered can help you prepare without turning the whole exercise into a tax textbook. You can ask Caira to:

• summarise the GOV.UK technical note in simpler language;

• read pension statements and create a pension list;

• compare your will and pension nominations;

• draft questions for your pension provider;

• draft a family note explaining your intentions;

• help an executor make a document checklist;

• turn confusing HMRC wording into plain English.

Caira is not a replacement for regulated financial, tax or legal advice. But she can help you get organised before you speak to someone, and that often makes the advice better.

FAQ

Will pensions definitely be taxed from April 2027?

Most unused pension funds and pension death benefits will be included in the estate for inheritance tax purposes for deaths on or after 6 April 2027. That does not mean every family pays tax. Thresholds, exemptions and the type of benefit still matter.

Should I cash in my pension before April 2027?

Not without careful thought. Cashing in a pension can trigger income tax, remove pension protections, create investment risk and leave you with less retirement security. For many people, a measured drawdown and gifting plan is safer than a sudden withdrawal.

Does the change affect death in service?

HMRC says qualifying death in service benefits from registered pension schemes are excluded from the new inheritance tax treatment.

What if I die before 6 April 2027?

HMRC says the current rules apply if the pension scheme member dies before 6 April 2027, even if the pension benefits are paid after that date.

Can my pension pay the inheritance tax directly?

The technical note describes a Pensions Direct Payment Scheme. Personal representatives and pension beneficiaries will be able to issue a payment notice requiring the scheme administrator to pay inheritance tax and interest due on the pension property directly to HMRC, if the notice is valid.

Further reading:

• GOV.UK: Technical note: Inheritance Tax on pensions, published 11 May 2026.

• GOV.UK: Inheritance Tax on pensions: liability, reporting and payment, summary of responses.

• GOV.UK: Inheritance Tax thresholds and benefit and pension rates 2026 to 2027.

• HMRC Inheritance Tax Manual IHTM14231, normal expenditure out of income.