UK Inheritance Tax Reform Targets Pensions from April 2027

From April 2027, unused pension funds and death‑benefit payments will be counted as part of an estate for inheritance‑tax purposes in the United Kingdom, meaning any amount above the existing allowance could be taxed at 40%. Financial advisers say the change creates a new loophole: converting pension pots into joint annuities that continue to pay an income to a spouse or adult child after death, thereby escaping inheritance tax. Clare Moffat of Royal London notes, “If you are not married but want your partner to get something when you die – without having to pay inheritance tax – a joint annuity could be a really good idea.”

A Standard Life survey found that 23% of Gen‑Z adults and 20% of millennials expect inheritance to form part of their retirement plan, but many parents are opting to spend their savings instead. Mike Ambery, retirement‑savings director at Standard Life, warned, “Inheritance can play an important role in family finances, but it is risky for younger people to build their retirement plans around money or property they may never receive.” The reforms are prompting younger Britons to reconsider reliance on future inheritances while advisers recommend early pension contributions and the use of joint annuities where appropriate.