Pensions & Inheritance Tax from 2027 - Module 1

Fathom Professional Learning

Module 1 - Pension Inheritance Tax from April 2027

Understanding the New Rules for Unused Pension Funds

Before you start, make sure you read Pensions & Inheritance Tax from 2027

45 minutes structured CPD | 10-question assessment | 80% pass mark

For many years pensions were often regarded as one of the most tax-efficient assets to leave to future generations. The changes taking effect from 6 April 2027 alter that position for many families, and this module explains the new rules and the practical issues professionals should consider when advising clients.

Learning Objectives

After completing this module, participants should be able to:

L01

Explain how the 2027 pension changes alter the IHT treatment of unused pension funds.

L02

Identify which estates are most likely to be affected.

L03

Understand the interaction between pension death benefits and the wider estate.

L04

Recognise when clients may benefit from reviewing their estate planning.

Intended audience

This module is designed for:

Solicitors
Accountants
Tax advisers
Financial planners
Professional executors
Estate practitioners

Legislative context

This module reflects:

Finance Act 2026
HMRC Technical Note (updated May 2026)
HMRC IHT Manual

CPD time

Reading article – 20 minutes
Case study – 10 minutes
Multiple choice questions – 10 minutes
Reflection – 5 minutes

Total – 45 minutes structured CPD

Assessment

10 questions, Pass mark 80%

Prerequisite knowledge

A basic understanding of Inheritance Tax and pension death benefits would be helpful but is not essential.

Key Learning Points

LP1

Most unused pension funds will form part of the estate for IHT from 6 April 2027.

LP2

Pension benefits passing to spouses may remain exempt from IHT, subject to the relevant conditions.

LP3

Beneficiary Income Tax should always be considered alongside IHT.

LP4

Estate planning should be reviewed before the rules take effect.

Practical Case Study

Sarah, aged 68, is widowed. Her late husband left 100% of his estate to her on his death, meaning 100% of his Nil-Rate Band (£325,000) and Residence Nil-Rate Band (£175,000) remain unused and available for transfer.

Sarah’s Current Estate

Home (passing to her two adult children): £700,000
ISAs / Cash: £250,000
Pension: £1,000,000
Total Net Estate: £1,950,000

Note: Because her total estate is £1,950,000, it remains under the £2,000,000 RNRB taper threshold, meaning the residence nil-rate band is not reduced by the taper provisions. Assuming the statutory conditions are met, Sarah may benefit from her own and her late husband’s transferable nil-rate bands and residence nil-rate bands.

Model Answer

Sarah’s circumstances suggest several planning issues should be reviewed before the new rules take effect on 6 April 2027.

A comprehensive review might include:

1. Assess the potential Inheritance Tax position

Sarah’s estate comprises:

Pension: £1 million
Home: £700,000
ISA: £250,000

Following the 2027 pension changes, most unused pension funds may form part of her estate for Inheritance Tax purposes. The first step would be to calculate her likely IHT exposure, taking account of the available nil-rate bands, residence nil-rate band (where applicable) and any transferable allowances that may be available from her late spouse.

2. Review beneficiary nominations

Although pension death benefits are generally distributed under the scheme rules rather than the Will, the trustees will usually consider Sarah’s expression of wishes when exercising their discretion.

Her beneficiary nomination should therefore be reviewed to ensure it reflects her current intentions.

3. Consider her retirement income strategy

The changes do not mean Sarah should automatically withdraw her pension.

Instead, consideration should be given to:

her income requirements;
Income Tax implications;
investment objectives;
cashflow needs;
potential Inheritance Tax consequences.

Any changes should form part of an overall retirement income strategy.

4. Review lifetime gifting opportunities

If Sarah has surplus income, consideration could be given to whether regular gifts might qualify for the normal expenditure out of income exemption, provided the statutory conditions are met.

Other gifting strategies may also be appropriate depending on her circumstances and objectives.

5. Consider the interaction of all assets

Planning should consider the estate as a whole rather than focusing solely on the pension.

This includes reviewing:

the home;
ISA investments;
pension assets;
liquidity;
intended beneficiaries.

6. Review estate planning documents

Her Will should be reviewed to ensure it remains appropriate.

Although the Will will not normally determine the distribution of pension death benefits, it remains central to the distribution of the remainder of her estate.

7. Review the potential tax position of beneficiaries

Where pension benefits may ultimately be inherited by adult children, consideration should also be given to the Income Tax position of those beneficiaries if taxable pension benefits are taken following Sarah’s death.

Key Learning Point

The purpose of the review is not to conclude that Sarah should withdraw her pension or implement any specific planning strategy.

Rather, the case demonstrates that the 2027 pension changes make it important to review:

the likely Inheritance Tax position;
retirement income strategy;
beneficiary nominations;
estate planning documentation;
available exemptions and reliefs; and
the interaction between the pension and the wider estate.

Knowledge Assessment - Test Your Understanding

You have now completed the learning and case study sections of this module.

The assessment contains 10 multiple-choice questions and requires a score of 80% or higher to pass. Please answer each question without assistance. Once all 10 questions have been completed, you will be asked to provide your name and email address.

If you achieve the required pass mark, your personalised CPD completion certificate will be emailed to you automatically.

Reflective Questions

Take a few minutes to reflect on what you have learned and how it may apply to your professional work.

Which of your existing clients are most likely to be affected?
What additional information would you need before recommending any planning?
How might the 2027 changes alter conversations with business owners?
Has this module changed your understanding?

CPD Learning Outcome

A participant achieving the pass mark should now be able to:

Explain when the 2027 pension changes take effect.
Describe the broad impact of Finance Act 2026 on unused pension funds.
Recognise that exemptions and reliefs continue to play an important role.
Identify why pension planning should be considered alongside wider estate planning.
Understand the importance of reviewing existing arrangements before the new rules take effect.

This module provides approximately 45 minutes of structured professional learning.

Participants achieving the pass mark should retain their completed assessment and certificate as evidence of structured professional learning and CPD, subject to the requirements of their own professional body.