UK inheritance tax reforms to bring pension funds into estate calculations from 2027

HM Revenue and Customs has issued guidance on inheritance tax changes that will count most unspent pension funds and death benefits as part of an estate’s value starting 6 April 2027. The reform aims to stop pensions being used mainly as inheritance‑planning tools. Families with substantial pension savings could face larger tax bills, and executors will need to locate and value pension assets, although exemptions remain for spouses, civil partners and most death‑in‑service benefits.

Standard Life reports that the impending rule change has driven a surge in demand for annuities among people over 75, with quote requests quadrupling and the share of quotes above £1 million more than doubling in 2026. About 10,500 estates are expected to become liable for inheritance tax and roughly 38,500 to see higher bills. Pete Cowell, head of annuities at Standard Life, said the reforms are prompting retirees to reconsider how they use pension savings, making annuities an attractive option for income certainty and tax planning.