New details released by HM Revenue and Customs this week reveal how unused pensions will soon be counted as part of a person’s estate for inheritance tax purposes: a move experts warn could create a huge administrative burden for grieving families.
The reforms, due to take effect from April 2027, are designed to stop pensions being used primarily as inheritance tax planning tools rather than for retirement income.
But PensionBee says the practical impact on ordinary families could be significant.
Maike Currie, vice president of personal finance at PensionBee, warned: “An admin nightmare is waiting in the wings for grieving families.”
She said executors and family members could effectively become “pension detectives”, tasked with tracking down old workplace pensions, forgotten accounts and online-only schemes – often while coping with bereavement at the same time.
Under the new rules, personal representatives handling someone’s estate will be responsible for locating pension pots, obtaining valuations, calculating inheritance tax liabilities and reporting the information to HMRC through a new online system.
Currie warned this could involve searching through old paperwork, emails, historic pension providers and incomplete records.
One of the biggest changes is that most unused pension funds and some pension death benefits will count towards inheritance tax calculations from April 6 2027.
However, some exemptions will remain in place.
Transfers to spouses and civil partners will still be exempt from inheritance tax, while death-in-service benefits are expected to remain outside the rules.
HMRC also confirmed pension schemes may be allowed to temporarily withhold up to 50 per cent of pension death benefits until inheritance tax bills are settled.
According to PensionBee, the measure is intended to prevent families having to sell non-pension assets to cover tax liabilities.
Despite the concerns, there was some reassurance for bereaved relatives.
Currie said HMRC had indicated that, in most cases, up to half of pension death benefits should still be released relatively quickly while tax calculations are ongoing.
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The Government is expected to continue publishing guidance and support tools throughout 2026 as pension providers prepare for the overhaul.
Experts are now urging savers to review their pension records and ensure beneficiary details are fully up to date with every provider.
Currie added: “Clear beneficiary information and accurate records could significantly reduce delays, confusion and stress for loved ones later on.”