From 6 April 2027, the rules on what happens to your pension when you die are changing — and most of the coverage has fixed on one number: 67%. The headline is real, but it is also widely misread, and it hides a second problem that gets almost no attention: the paperwork it lands on the family left behind.
Beqst is an estate-organisation tool, not a law firm or a financial adviser. What follows is general information to help you get organised — not tax advice. For decisions about your own pension and estate, speak to a regulated financial adviser.
What is actually changing in April 2027?
From 6 April 2027, most unused pension funds and pension death benefits will be counted within the value of your estate for inheritance tax (HMRC). Today, most unused pensions generally sit outside the estate, which is why they have become a common way to pass wealth on. That treatment is ending for most pots. Some benefits — certain death-in-service payments and some dependants' scheme pensions — are expected to stay outside scope, but the headline shift is simple: the pension you do not spend may now be taxed as part of what you leave behind.
Where does the "67%" actually come from?
Here is the part the headlines skip: 67% is a worst case, not the typical outcome. It applies in one specific situation — where the pension holder dies after age 75 and the money is inherited by an additional-rate (45%) taxpayer. In that case the fund can be hit by inheritance tax and then income tax on withdrawal, which combine to roughly 67%. For most families the combined rate is lower: around 52% where the beneficiary pays basic-rate income tax, and around 64% at higher rate. If death is before age 75, the income-tax layer generally does not apply at all. These income-tax bands are for the rest of the UK; Scotland sets its own bands, so a Scottish-taxpayer beneficiary's combined rate will differ.
The "67% trap" label was coined by financial advisers (such as The Private Office) and amplified by the personal-finance press — it is not an HMRC term. It is a useful shorthand, but quoting it without the "after 75 / additional-rate / up to" conditions is how it becomes misleading.
The problem nobody is talking about: the paperwork
Tax is only half the story. Bringing pensions into the estate also pulls more families into estate administration and inheritance-tax reporting — and that process runs on documentation. Someone has to identify every pension, find the provider, value the pot at the date of death, work out the beneficiary position, and report it correctly, often before anything can be distributed.
For a grieving family with no map to your affairs, that is weeks of detective work: phoning providers, hunting for old statements, guessing which schemes you still held. A workplace pension from three jobs ago is exactly the kind of thing that gets overlooked — and overlooked assets can lead to delays, errors, or missed reporting deadlines. The 2027 change does not just create a tax bill; it creates an admin burden, and that burden falls on the people you love at the worst possible time.
How to get ready for 2027 (without giving anyone tax advice)
You cannot organise your way out of the tax — that is a job for a regulated adviser. But you can make the administration dramatically easier, and that is where most of the avoidable pain lives:
- Know what you hold. List every pension — current, old workplace, and personal — and where each is held.
- Check your nominations. Confirm the beneficiary nomination (expression of wish) on each pension is current. Out-of-date nominations are a common and easily-avoided problem.
- Leave a map, not a maze. Record where the details live so your executor is not starting from zero.
- Tell your executor it exists. A record no one can find helps no one.
This is exactly what a death folder is for — a single, organised place that holds your pensions, accounts, beneficiaries and key contacts, so the people sorting your estate are not also playing detective. For the tax planning itself, take regulated advice well before April 2027.