IHT and pension funds: Are changes still on track for 2027 deadline?

The announcement to include pensions in your estate for inheritance tax (IHT) purposes from 6^th April 2027 is widely known. What is less widely known is that there are complications here that may well impact whether these changes can become legislation by that date. So, where are we with this process and more importantly, what does this mean for you?

This bill has been approved by the House of Commons. The House of Lords Economic Affairs Sub Committee has reviewed the draft Finance Bill 2025/26 which sets out the proposed reforms for the IHT treatment of pensions.

The issue is that the proposed changes are not that straightforward. There are still questions about how these changes can be implemented. How can estates meet the six-month deadline where illiquid property assets are difficult to calculate, for example?  And how will pension term assurance be assessed?

There are also legislative hurdles to overcome, not least the fact that draft legislation will be required for personal representatives to speak to pension schemes and platform providers. Currently, no authority exists.

Indeed, the House of Lords Economic Affairs Sub Committee makes a number of recommendations to the Government, many highlighting the absence of finalised legislation and supporting guidance. As a result, the report recommends that, unless sufficient clarity is provided before 6th April 2026, the implementation of these changes should be delayed by 12 months, with scope for review once the regime has bedded in.

Given the scale of change needed, pension schemes and platform providers will need time to ensure their systems can operate within the required timeframes and avoid penalties falling on personal representatives. There is also a duty of care in how clients dealing with a bereavement are treated in a compassionate manner in such difficult times. These things take time and need to be done properly. As I say, this is not straightforward.

We are not saying this reform will not happen. We are saying that there is much to review and reflect on before these proposed changes can be made. It will be well worth keeping an eye on how things progress over the next couple of months.

If you would like to read more about the proposed changes to pensions where inheritance tax is concerned, take a look at our previous articles on the subject:

IHT changes on pension funds: Your questions answered

What the upcoming IHT changes mean for couples

Important changes to IHT on pension funds