Overview

• HMRC has confirmed that from April 2027 all unused defined-contribution pension pots will be added to the inheritance tax base and taxed at rates of up to 40%, regardless of the saver’s age at death.
• Government projections forecast the pension change will raise roughly £1.5 billion annually by 2029–30 and help push total IHT receipts toward £14.3 billion.
• Treasury officials are examining reforms to lifetime gifting, such as introducing a cap on tax-free transfers and adjusting taper relief, to bolster receipts and curb avoidance.
• Industry bodies like the Investing and Saving Alliance and think tanks such as IPPR have called for exemptions for smaller pension pots and first-time homebuyers and proposed recipient-based levies to protect lower-income beneficiaries.
• Ministers, including Chancellor Rachel Reeves, have delayed final design decisions until after the Office for Budget Responsibility’s official forecast in order to assess behavioural impacts and administrative burdens.