For many years, pension funds have sat outside a person’s estate for Inheritance Tax (IHT) purposes. That has made pensions an attractive way to pass wealth on to future generations.
However, from 6 April 2027, the rules are changing1. Most unused pension funds and pension death benefits will be brought into account when calculating IHT on an estate.
What does this mean?
In simple terms, if you die on or after 6 April 2027, the value of most unused pension funds will be added to the value of your estate when assessing whether IHT is payable. Assets that were previously outside the IHT calculation may therefore become taxable.
For some families, their estate will still remain below the available IHT thresholds (such as the Nil Rate Band, which is set at £325,000 and currently frozen until April 2031). For others, it could increase the amount of tax payable and reduce what is passed on to beneficiaries.
An opportunity to think differently about giving
These changes may be a prompt for people to review their estate plans.
Gifts to UK charities from your estate are exempt from IHT. In addition, where at least 10% of an estate's taxable value is left to charity, the IHT rate on the taxable part of the estate can reduce from 40% to 36%. From 6 April 2027, the value of your unused pension funds will be taken into account in calculating whether your charitable legacy meets the 10% threshold – so your charitable legacy may need to be larger than you had previously expected in order to qualify for the favourable IHT treatment (see our briefing paper on legacy giving for more information).
Stewardship can manage your charitable legacy and distribute it to a range of charities that you choose; you simply leave a single legacy to Stewardship and specify how you would like it to be distributed in an Expression of Wishes. You can read more in our Guide to Leaving a Legacy.
For those who have built up significant pension savings, the new rules may create an opportunity to consider whether a greater proportion of their wealth could be used to support causes they care about. A charitable gift in a Will can help advance God's work for future generations and with no IHT to pay on the gift, more of the funds are available for giving.
Don't forget pension nominations
As well as reviewing your Will, it is worth checking any pension Expression of Wishes or beneficiary nomination forms. These documents help pension providers understand who you would like to benefit from your pension savings and may also provide an opportunity to include charitable beneficiaries.
A good time to review your plans
The introduction of these new rules is a reminder that estate planning is something to be reviewed at regular intervals. After caring for family, whether your priorities are supporting your church, advancing gospel ministry or supporting a range of charitable causes, now may be a good time to review your Will, your pension nominations and your longer-term giving plans.
Discover our legacy support services
1 HMRC Policy Paper: "Inheritance Tax: unused pension funds and death benefits", 26 November 2025
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Susie Child
Susie is a solicitor who has experience of advising charities and joined Stewardship’s Legal Team in 2024. She has loved being very involved in the establishment and growth of a plant church in East London, where her husband is the pastor.
Susie is passionate about seeing people grow in their love of Jesus and seeing the local church grow in loving, bold and impactful community both within the family of the Church and through reaching out to its local community.
