09/05/2026
๐ฒ๐ณ% ๐ง๐ฎ๐
๐ผ๐ป ๐๐ป๐ต๐ฒ๐ฟ๐ถ๐๐ฒ๐ฑ ๐ฃ๐ฒ๐ป๐๐ถ๐ผ๐ป๐: ๐ช๐ต๐ฎ๐ ๐๐ต๐ฒ ๐ก๐ฒ๐ ๐๐ฎ๐ ๐ ๐ฒ๐ฎ๐ป๐ ๐ณ๐ผ๐ฟ ๐ฌ๐ผ๐๐ฟ ๐๐ฎ๐บ๐ถ๐น๐
The Finance Act 2026 received Royal Assent on 20 March 2026. With it, the long-discussed change to the way pensions are treated on death has moved from speculation to statute. For many families, pensions are about to become one of the least efficient assets to pass on, rather than one of the most.
It is worth taking the time to understand what is actually changing, and what the numbers look like in practice.
๐ช๐ต๐ฎ๐ ๐๐ต๐ฒ ๐น๐ฎ๐ ๐ป๐ผ๐ ๐๐ฎ๐๐
From April 2027, unused pension funds will form part of the inheritance tax estate. Where the pension holder is over 75 at the point of death, beneficiaries who later draw on the inherited fund will also pay income tax at their marginal rate. The two charges fall in sequence on the same money.
That sequence matters. It is not one tax or the other. It is one followed by the other, with the second applied to what remains after the first.
๐ง๐ต๐ฒ ๐ป๐๐บ๐ฏ๐ฒ๐ฟ๐ ๐บ๐ผ๐๐ ๐ณ๐ฎ๐บ๐ถ๐น๐ถ๐ฒ๐ ๐ต๐ฎ๐๐ฒ ๐ป๐ผ๐ ๐๐ฒ๐ ๐ฟ๐๐ป
Take a ยฃ500,000 pension intended for adult children. Under the new rules, an inheritance tax charge of 40 per cent could reduce the fund to ยฃ300,000 before the children see any of it. If those children are higher rate taxpayers, income tax on the remaining amount could leave the family with around ยฃ165,000.
A combined effective rate of 67 per cent is not a worst case projection. It is the outcome the legislation produces for a fairly typical scenario.
๐ช๐ต๐ ๐๐ต๐ถ๐ ๐บ๐ฎ๐๐๐ฒ๐ฟ๐ ๐ป๐ผ๐, ๐ป๐ผ๐ ๐ถ๐ป ๐๐ฝ๐ฟ๐ถ๐น ๐ฎ๐ฌ๐ฎ๐ณ
The temptation is to wait. The implementation date is more than a year away, and the rules feel distant. The risk in waiting is that the better planning options usually need time to put in place, and time to bed in. Reviewing nominations, restructuring how a pension is drawn, considering the wider estate alongside the pension rather than in isolation: these are not last-minute decisions.
Equally, not every client needs to act. For some families, the existing arrangements remain sensible even after the change. The point is not that everyone should reorganise their affairs. The point is that every affected family should now understand the actual numbers, and make a deliberate choice rather than an accidental one.
๐ ๐ฝ๐ฒ๐ป๐๐ถ๐ผ๐ป ๐ฟ๐ฒ๐๐ถ๐ฒ๐ ๐๐ต๐ฎ๐ ๐๐ฎ๐ธ๐ฒ๐ ๐๐ต๐ฒ ๐ป๐ฒ๐ ๐ฟ๐๐น๐ฒ๐ ๐๐ฒ๐ฟ๐ถ๐ผ๐๐๐น๐
If you would like to know how the Finance Act 2026 affects your own position, and what your realistic options are, we offer a no-obligation pension review with one of our advisers. The review covers your pension structure, your wider estate, your beneficiaries, and the planning options that genuinely fit your circumstances.
