When the Finance Act 2026 received Royal Assent on 18 March, it confirmed what many of us in the profession had been preparing clients for. From 6 April 2027, most unused pension funds and pension death benefits will fall within the scope of inheritance tax for the first time.
The mechanics of that change are covered in our inheritance tax on pensions 2027 piece. What I want to talk about here is different.
The April 2027 change has thrown a sharper light on a set of estate planning basics many people have quietly been putting off.
Wills. Expressions of wishes. Lasting Powers of Attorney. None of these are new. But under the new rules, the cost of leaving them undone has gone up, and the people who pay that cost are usually the next generation.
Key Takeaways
- The Finance Act 2026 is now law. Most unused pension funds will fall within inheritance tax from 6 April 2027.
- Once pensions form part of your estate, your Will, your expression of wishes, and your Lasting Powers of Attorney all carry more weight than they used to.
- Around 35 to 40 per cent of UK adults have a valid Will. Without one, intestacy rules decide who inherits, and unmarried partners and stepchildren can be left with nothing.
- A registered Lasting Power of Attorney lets your loved ones keep your finances managed if you lose mental capacity.
Why has the April 2027 change made estate planning groundwork more urgent?
For a long time, pensions have sat outside of the inheritance tax conversation. They were treated as a separate pot, useful for passing wealth on, and largely insulated from the rest of the estate. From 6 April 2027, that distinction goes away for most people.
Once your pension is counted as part of your estate, the documents that govern your estate become genuinely consequential.
The personal representatives named in your Will become responsible for reporting and paying any inheritance tax due on the pension element.
Your expression of wishes becomes a more strategic document. And if you lose mental capacity in the years before death, the question of who can act on your behalf becomes a live one. Government estimates suggest around 8 per cent of estates will be affected. If yours is one of them, the groundwork matters more now than it did a year ago.
How your pensions are structured matters too. Where benefits are spread across multiple schemes, the work falling on personal representatives multiplies, something an IFA can help you organise and something we look at in our separate piece on pension consolidation.
Why is an up-to-date Will more important than ever?
This is the area where most clients have something to do.
Industry analysis suggests only 35 to 40 per cent of UK adults have a valid Will. For everyone else, the rules of intestacy decide what happens, and they are unforgiving in a way that often surprises people.
Under intestacy rules in England and Wales, an unmarried partner inherits nothing automatically, regardless of how long you have lived together.
Stepchildren who have not been legally adopted have no automatic right to inherit under the Administration of Estates Act 1925, regardless of whether you were married to their parent.
If you are married with children and your estate is worth more than £322,000, your spouse takes the first £322,000 (the statutory legacy, confirmed in the HMRC Inheritance Tax Manual), and the remainder is split between your spouse and your children.
A Will also lets you choose your personal representatives, the people who will deal with HMRC, value your assets, and pay any inheritance tax due. Under intestacy, that role falls to whoever is closest in the legal hierarchy, who may not be the person best placed to handle a complex estate.
If you have a Will, when did you last look at it? Births, marriages, divorces and significant changes in wealth all affect whether it still reflects what you want, and the April 2027 change is a sensible prompt for a review.
What is an expression of wishes and why does it need reviewing?
An expression of wishes is the form your pension scheme uses to record who you would like to receive your pension benefits when you die. It is not legally binding, but in practice an up-to-date expression of wishes is usually followed.
Many clients I work with as an independent financial adviser completed theirs years ago and have not looked at it since. Sometimes the named beneficiaries are no longer the people they would choose today. Sometimes the form names a former spouse, or names children when a different structure (perhaps including grandchildren or a trust) would now make better sense.
After April 2027, the expression of wishes becomes a more strategic document. Pension benefits passing to a surviving spouse or civil partner remain exempt from inheritance tax. Benefits passing to other beneficiaries may not. Reviewing who is named, and why, is one of the most practical things you can do this year.
Why does a Lasting Power of Attorney matter for your pension?
A Lasting Power of Attorney (LPA) is a legal document that lets you appoint people you trust to make decisions on your behalf if you lose mental capacity. There are two types: one for property and financial affairs, and one for health and welfare. Both have to be registered with the Office of the Public Guardian before they can be used.
The Office of the Public Guardian processed over a million LPA applications in 2024 to 2025, and the reason is straightforward. Without one, if you lose mental capacity, your family cannot simply step in. They have to apply to the Court of Protection to be appointed as a deputy, which is slower, more expensive, and more stressful at exactly the wrong moment.
For pension and inheritance tax planning, a registered property and financial affairs LPA lets the people you trust act on your behalf, whether that involves drawdown, gifting, or wider estate planning. Registration takes around eight to ten weeks.
What does this mean for the next generation?
Most clients are doing this for their children and grandchildren, and the April 2027 change makes that motivation more concrete.
A pension that would have passed to children outside the inheritance tax system may now attract a 40 per cent charge above the available nil-rate bands, and beneficiaries may also pay income tax on what they draw down.
The arithmetic gets serious quickly.
The structural choices made now (the Will that names the right personal representatives, the expression of wishes that reflects today’s family, the LPA that lets sensible decisions keep being made) are the ones that protect the next generation when the time comes.
Talk to a Chartered Financial Planner in Dorset about your estate plan
If you have read this far, the chances are you already know there are one or two things on this list that need attention. The hardest part is often just sitting down and starting.
Baggette + Co. is a Chartered firm of independent financial advisers based in Poole, working with families across Dorset, Hampshire and further afield. We work alongside solicitors and accountants to make sure your pension, your Will, your expression of wishes, and your wider estate plan all point in the same direction.
Whether you are at the Preparation stage of your financial journey or already in Early Retirement, we can help you take the April 2027 change in your stride and turn it into a prompt for clearer planning, calmly, in the time you still have.
To start a conversation, contact Jonathan Holdaway on 01202 676 983 or email [email protected].
Frequently Asked Questions about estate planning and the April 2027 pension changes
It is a sensible prompt for a review, though the change does not invalidate existing Wills. What it does is make the role of your personal representatives more significant, because they will now be responsible for reporting and paying any inheritance tax due on pension benefits. If your Will is more than a few years old, it is worth reviewing alongside your wider estate plan.
Pension scheme trustees can pay benefits to a cohabiting partner, particularly where you have named them on your expression of wishes. However, the inheritance tax spousal exemption only applies to a surviving spouse or civil partner.
From April 2027, pension benefits passing to a cohabiting partner could be added to your estate for inheritance tax purposes. If you are unmarried and want your partner provided for, this is a conversation worth having with an independent financial adviser.
Once submitted to the Office of the Public Guardian, registration typically takes eight to ten weeks. The forms can be completed online at GOV.UK or with the help of a solicitor, and you can register both a property and financial affairs LPA and a health and welfare LPA together.
DISCLAIMER:
Baggette + Co. Wealth Management is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority does not regulate tax planning, cashflow planning and estate planning. The above information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon as, financial advice. Capital is at risk. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement. Tax rules may change, and the value of tax reliefs depends on your individual circumstances.