Inheritance tax rule change could become ‘admin nightmare’ for family | Personal Finance | Finance

Inheritance Tax rules are changing next April as certain pension pots will be included in estate calculations. Experts predict the controversial move could increase Inheritance Tax bills by an average of £34,000 but others are warning that savers who don’t keep their pensions up to date also risk forcing their families to become detectives.

However, taking one simple and free step while you’re alive could help ease the burden, both financially and emotionally, on your dependents. Maike Currie, VP Personal Finance at PensionBee explained: “An admin nightmare is waiting in the wings for grieving families. Personal representatives – usually family members, friends or executors responsible for dealing with someone’s estate after death – will effectively become pension detectives, expected to track down old workplace schemes, historic pension pots and online-only accounts, often with incomplete records and missing passwords.”

While having all of these details in one place can help your family figure it out quicker, having an up to date Expression of Wishes can put more of the administrative burden on your pension provider rather than your grieving loved ones.

These forms on private pensions detail what you want to happen to your money in case you die before withdrawing it. Many people may have filled one out when they first started their private pension but few keep it updated, which could mean it has outdated contact details or even that ex partners may still be listed as next in line for your money.

Maike continued: “One simple but important thing people can do now is ensure their expression of wish forms detailing their beneficiaries are up to date with all pension providers. Clear beneficiary information and accurate records could significantly reduce delays, confusion and stress for loved ones later on.”

The PensionBee expert also explained that it’s not all doom and gloom for families. She said: “There is a bit of good news for bereaved families with HMRC confirming that, in most cases, up to half of pension death benefits should still be able to be paid out relatively quickly while inheritance tax liabilities are being settled.”

From April 6, 2027, most unused pension funds and certain pension death benefits will be included as part of a deceased person’s estate for Inheritance Tax purposes. It is meant to prevent people from using their pension pots as a vehicle to transfer wealth to the next generation instead of actually using it for retirement.

The expert added: “The reforms may be aimed at stopping pensions being used as inheritance tax shelters, but the practical burden will fall heavily on ordinary families navigating bereavement at an already stressful time. Pension housekeeping is about to become essential estate planning.”

As part of the new changes coming in next year, HMRC is rolling out guidance, templates and support throughout 2026 and into spring 2027. However, this could mean people only get official updates from their pension providers shortly before the rules come into force.

In some cases, pension providers may be told to withhold some of the pension death benefits until Inheritance Tax bills are settled, which could help stop families from having to use non-pension assets to pay the bill according to HMRC.

Pension transfers to spouses and civil partners living in the UK will be exempt from Inheritance Tax but these may still need to be reported.