From April 2027, significant changes to the inheritance tax (IHT) treatment of pensions are set to reshape the obligations and potential liabilities faced by Personal Representatives (PRs). Under the new rules, pension death benefits (previously outside of a person’s taxable estate in many cases) will fall within the scope of IHT. As a result, PRs will become responsible for identifying, valuing, and accounting for these benefits as part of the deceased’s estate.

This shift creates several layers of risk. Pensions are often complex and held across multiple providers and may include discretionary scheme benefits that are not straightforward to value. A failure to identify or correctly report these can expose PRs to penalties from HMRC, even where the mistake was unintentional. The reforms also increase the practical burden of estate administration. PRs will need to make more detailed enquiries of pension providers, navigate differing scheme rules, and ensure beneficiaries understand that pension pots may now suffer IHT deductions that reduce what they ultimately receive.

What can I do now?

With these heightened responsibilities and considering the likely increased complexity of administering an estate, you may wish to consider appointing professional executors to your estate. Professional executors will charge for their services in administering an estate, so the terms of this must be clarified when making your Will or making changes to your existing Will. It would also be wise to keep a secure list of all your pension details so that your PRs can take action as quickly as possible after your passing to contact the providers and begin the lengthy administration process.

If you are appointed as a PR, early professional advice when acting will become essential. Clear guidance, meticulous information gathering, and robust documentation will be key to protecting both the estate and the PRs administering it. 

For help with making or updating your Will or for support with estate administration, please get in touch.