Pension planning is changing ahead of new inheritance tax rules.

From 6 April 2027 UK pensions will be included in estate values for inheritance tax, potentially increasing the chance an estate exceeds the current £325,000 threshold; allowances are frozen until April 2031.

Major changes to how pensions count for inheritance tax will take effect on 6 April 2027. Currently pensions are excluded from estate valuations for IHT, but they will be included from that date. That change could increase the likelihood an estate exceeds the £325,000 IHT threshold. Inheritance tax allowances are frozen until April 2031, which may further affect estate values. Main facts: - The reform takes effect on 6 April 2027 and will include pension savings in estate valuations for inheritance tax. - The current IHT nil-rate band is £325,000, and allowances are frozen until April 2031. - Pension funds are normally accessible from age 55, with common options being purchasing an annuity or remaining invested and making withdrawals via drawdown. - Gifting provisions cited include an annual £3,000 exemption, a separate £250 small-gift allowance (not to the same recipient as the £3,000), wedding or civil partnership gifts of up to £5,000 for a child and £2,500 for a grandchild, and larger gifts that can be exempt if the giver survives seven years after the gift. - Workplace pension National Insurance relief will face a cap of £2,000 from April 2029, according to the article. - The article notes that life insurance written in trust is sometimes used to provide a payout to cover expected IHT exposure; experts said premiums and trust arrangements can be costly and that whole-of-life cover is often framed as an 'investment' for an estate. Summary: Including pensions in estate valuations may raise the value of some estates above the current £325,000 IHT threshold, and the freeze on allowances until 2031 could increase that effect. The change takes effect on 6 April 2027; how individuals proceed will depend on personal circumstances and the options discussed by advisers, and the next steps are undetermined at this time.