April 2027 is when significant changes to the way pensions interact with Inheritance Tax come into force. For many families in Oswestry and across Shropshire, this is a genuine shift in the planning landscape, not a minor tweak. If you have a defined contribution pension and you are thinking about how your estate will pass to your children, it is worth understanding what is changing and what your options are now, while there is still time to act.
Important: legislation and guidance are evolving
In the October 2024 Autumn Budget, the government announced that, from 6 April 2027, most unused pension funds and certain pension death benefits will be brought within a person’s estate for Inheritance Tax (IHT) purposes. These changes were enacted in the Finance Act 2026, which received Royal Assent on 18 March 2026. However, further secondary legislation, HMRC guidance and implementation details are still being developed. This is a fast-moving area, and the information below reflects the current position as of April 2026. Independent financial or tax advice should be obtained before making decisions based on these changes.
What is changing in April 2027?
Until now, defined contribution pension pots have sat outside your estate for Inheritance Tax purposes. This has made pensions an extremely efficient way to pass wealth to the next generation. Many people have deliberately drawn down other assets first in retirement, keeping their pension pot intact because of this benefit.
From April 2027, inherited pension pots will fall within the scope of Inheritance Tax. This means that upon death, the value of your unused pension fund will be added to your estate and potentially taxed at 40% above the available nil rate band.
For a family in Oswestry with a combined estate of, say, £1.2 million, including a pension pot worth £350,000, the tax implications could be significant. Previously, that pension would have passed tax-free. Under the new rules, it will be included in the Inheritance Tax calculation.
What has not changed
It is worth being clear about what remains the same. Spouses and civil partners can still inherit each other’s estates free of Inheritance Tax, and the pension changes do not affect this for transfers between partners. The nil rate band (£325,000 per person) and the residence nil rate band (£175,000 per person) remain in place, giving a couple a potential combined allowance of £1 million before IHT applies.
You can find more details on how these allowances work on our Inheritance Tax planning page.
| Key numbers: IHT and pension changes 2027 | Details |
|---|---|
| Change effective from | 6 April 2027 |
| What is changing | Most unused defined contribution pension pots are included in the estate for IHT |
| Current IHT rate | 40% on assets above the nil rate band |
| Nil rate band | £325,000 per person |
| Residence nil rate band | £175,000 per person (qualifying properties) |
| Combined allowances (couple) | Up to £1,000,000 |
| Spouse exemption | Pension assets passing between spouses remain exempt |
| Legislation status | Enacted in the Finance Act 2026, details still being finalised (April 2026) |
Why Oswestry families need to act
The combination of frozen nil rate bands and rising asset values has already pulled more estates into the Inheritance Tax net over the last decade. For families in Oswestry, where property values have increased and where many households also have significant pension savings, the 2027 changes could have a meaningful impact.
The good news is that there is time to put strategies in place. The changes do not come into effect until April 2027, and the decisions you make in the next 12 months could make a significant difference to how much of your estate passes to your family.
What can you do now?
Review your pension and estate together
The first step is to look at your pension and your wider estate as a single picture rather than in isolation. Consider how large your pension pot is likely to be on death and how that interacts with the rest of your estate. What would your Inheritance Tax liability look like under the new rules?
Consider changing the order in which you draw assets
If you had planned to preserve your pension and draw down other assets first in retirement, that strategy may need revisiting. Drawing on your pension more quickly while keeping other assets that attract different tax treatment may now be the better approach for some people. But this depends heavily on your individual circumstances.
Explore gifting strategies
Making gifts to family members now, while you have time on your side, is one of the most effective ways to reduce an Inheritance Tax bill. Most gifts fall outside your estate after seven years. There are also annual exemptions and smaller gift allowances that take effect immediately. Our Inheritance Tax planning service covers these in more detail.
Look at trusts
Trusts can play a role in managing how pension death benefits are structured and how other assets pass to the next generation. The rules are complex, but a well-structured arrangement can reduce your estate’s exposure to Inheritance Tax. See our Inheritance Tax page for an overview of trust options.
Make sure your expression of wishes is up to date
Pension death benefits are paid at the discretion of the pension trustees, guided by your expression of wishes. With the tax landscape changing, it is worth reviewing who you have nominated and whether your current arrangement still makes sense given the new rules.
Frequently asked questions
What is the pension IHT change in April 2027?
From 6 April 2027, most unused defined contribution pension pots will be included in your estate for Inheritance Tax purposes. Previously, pension funds sat outside the estate, making them an efficient way to pass wealth to the next generation. Under the new rules, the unused pension is added to your estate and taxed at 40% above the available nil rate band.
Does this affect defined benefit pensions?
No. Defined benefit pensions pay a guaranteed income during your lifetime. They do not leave a pot of money to pass on in the same way, so they are not affected by this change in the same way. The change primarily affects defined contribution pension pots held in drawdown or undrawn at death.
Can I still pass my pension to my spouse tax-free?
Yes. Pension assets passing between spouses and civil partners remain exempt from Inheritance Tax. The change primarily affects assets passing to children and other non-spouse beneficiaries.
Is it too late to plan around the 2027 changes?
No. The changes do not come into effect until April 2027, which means there is still time to review your estate and put strategies in place. However, some options, such as the seven-year rule for gifts, take time to be fully effective. The earlier you act, the more options you’ll have. Our Oswestry financial advisers can help you understand your position and advise you on what to do.
Get local financial advice in Oswestry
The pension IHT changes are significant, and the strategies available are not one-size-fits-all. What is right for one family in Oswestry will not be right for another. Beaumont Wealth works with clients across Oswestry and the surrounding area. Our Chartered, independent advisers will help you understand how the 2027 changes affect your estate and what you can do now.
Visit our Oswestry financial adviser page or call us to arrange your free initial appointment.
Important information
This article is intended for information purposes only and does not constitute personal financial advice. The information is based on our understanding of current legislation and HMRC guidance as at April 2026, which may change. The April 2027 pension inheritance tax changes are subject to parliamentary approval and the details may be amended before implementation. Tax treatment depends on individual circumstances. Beaumont Wealth is authorised and regulated by the Financial Conduct Authority.
