The short answer: if you have an unused defined contribution pension pot and a reasonably sized estate, there is a good chance you will be affected to some degree. But the size of the impact varies enormously depending on your specific circumstances.
Use the scenarios below to identify your situation, then use our calculator for a personalised estimate.
Who
Pension
Estate
Extra IHT from 2027
Verdict
John & Mary, 67
£280k SIPP
£480k
£0
Not affected*
Patricia, 71
£350k
£530k
£140k
Urgent
David, 64
£220k SIPP
£615k
+£88k
Significantly affected
Claire, 58
£600k SIPP
£670k
+£108k
Affected – plan now
Alan, 73
£45k left
£390k
£0
Not affected
The typical couple
John & Mary, both 67, £280k SIPP, £420k home, £60k savings, married
Not affected*
Extra IHT
£0
Before
£0
>
After 2027
£0
🟢Not directly affected but only because of the married couple’s double allowance. If Mary predeceases John, his threshold on second death is lower and the pension inclusion could push him into a taxable position. Worth planning for.
🔴Significantly affected – planning is urgent. And because Patricia is over 75, her children also pay income tax on pension withdrawals on top of this, taking the effective tax on the pension itself to over 60%.
🔴Significantly affected – multiple issues. David’s buy-to-let also carries CGT on any lifetime gain on disposal, and it doesn’t qualify for the Residence Nil-Rate Band.
The high earner approaching retirement
Claire, 58, £600k SIPP, £700k home, £150k mortgage, £120k ISA, married
Plan now
Extra IHT
+£108k
Before
£0
>
After 2027
£108k
🟡Affected, but with significant planning runway. Claire is 58 – nine years to plan before the change takes effect. The earlier she takes advice, the more options are available. Act now.
The already-drawing-down retiree
Alan, 73, £45k left in pot, £360k home, £30k savings, no mortgage
Not affected
Extra IHT
£0
Before
£0
>
After 2027
£0
🟢Not materially affected by the 2027 change, given the pension has already been largely drawn down. The estate stays below the threshold even with the pension included.
* Not affected on first death, but the position changes on second death – see the full note above.
Are you affected? Four quick questions.
Tap yes or no – we’ll tally your likely exposure.
1. Do you have a defined contribution pension (SIPP, personal, or workplace DC) you haven’t fully drawn down?
2. Is your total estate – property, savings, ISA, pension – likely to exceed £500k (single) or £1m (married)?
3. Are you planning to leave some or all of your pension to children or grandchildren rather than a spouse?
4. Are you over 75, or likely to be alive and holding pension funds beyond age 75?
Answer the questions above
Your likely exposure will appear here.
IMPORTANT DISCLAIMER: Nothing on this page constitutes financial advice. The options described are general information only. Your individual circumstances will determine which, if any, of these approaches are suitable for you. We strongly recommend speaking to a regulated independent financial adviser before making any changes to your pension or estate planning.
