Sometimes, yes. Usually, less. This page works the April 2027 pension inheritance change honestly: what actually changes, the full table of what a £100,000 unspent pot becomes in your heirs' hands, and who the headline number does and does not describe.
Today, a defined-contribution pension you die without spending usually passes outside your estate: no inheritance tax, and if you die before 75, typically no income tax for your beneficiaries either. That made the pension the best inheritance wrapper in the system, and "spend the ISA, preserve the pension" the standard ordering.
The change reverses the special status, not the pension itself. From 6 April 2027, unused pension funds and death benefits count as part of the estate for inheritance tax. This is law, not a proposal: it received Royal Assent on 18 March 2026 and takes effect for deaths from 6 April 2027. What did not change matters just as much: the income-tax side is as it was. Die before 75 and beneficiaries draw the money income-tax-free within the lump sum and death benefit allowance of £1,073,100; die at or after 75 and they pay income tax at their own marginal rate on what they draw. The "67%" headline is what happens when the new inheritance layer and the old income-tax layer stack on the same pot, so the honest question is when they stack, and on whom.
Assumptions stated plainly: death from 6 April 2027 onwards, the estate is already over its nil-rate bands (so the pension sits fully in the 40% layer), and beneficiaries draw the money as income. Change any of those and the numbers improve; the next section is exactly about that.
| Scenario (death from 6 Apr 2027) | Inheritance tax | Income tax on the rest | Heirs keep | Effective rate |
|---|---|---|---|---|
| Spouse or civil partner inherits, you die before 75 | £0 | £0 | £100,000 | 0% |
| Children inherit, death before 75 | £40,000 | £0 | £60,000 | 40% |
| Children inherit, death after 75, basic-rate heirs | £40,000 | £12,000 | £48,000 | 52% |
| Children inherit, death after 75, higher-rate heirs | £40,000 | £24,000 | £36,000 | 64% |
| Children inherit, death after 75, additional-rate heirs | £40,000 | £27,000 | £33,000 | 67% |
Two details keep this table honest where the scary versions are not. The income tax applies to what is left after inheritance tax, not to the original pot, which is why the worst case is 67% and not the 85% that adding 40% and 45% would suggest. And the 67% row requires an additional-rate beneficiary: someone already earning over £125,140, drawing the whole inherited pot as income on top. For most families the realistic bad case is the 52% or 64% row, and the difference between those rows, the heirs' own tax bands and the pace of drawing, is itself a lever.
Information and guidance only. Not personal advice. The table shows tax arithmetic for stated scenarios under rules enacted as of March 2026, not a prediction of your estate's bill or a recommendation to act. Estate outcomes turn on facts this page cannot see: your bands, your beneficiaries, your other assets, and rules as they stand at death. HMRC implementation detail for the 2027 change is still being finalised. Verify decisions with a qualified FCA-authorised adviser or estate practitioner before acting.
Inheritance tax starts where the estate passes £325,000, or up to £500,000 where the £175,000 residence band applies, and married couples can stack both to £1,000,000. The pension joining the estate matters in proportion to how far above those lines it pushes you.
That cuts both ways. A couple with a £600,000 house, modest savings and a £200,000 pension may still be under the combined bands, in which case the 2027 change costs them nothing at all, and the table above collapses to its income-tax rows. A single homeowner with the same numbers is over the line, and the pension is now the marginal asset being taxed at 40%. The same pot, the same change, opposite outcomes: which is why a headline percentage is the wrong thing to plan from, and an estate-level calculation is the right one. Adding the pension to the estate also erodes the residence band for estates near £2,000,000, where that band tapers away, a second-order effect the headline never mentions.
Information, not recommendations: these are the moves the change has put on the table, each with a real cost attached.
Spending the pension earlier and preserving ISAs and cash reverses the old ordering; it trades inheritance-tax efficiency for income tax paid at your own marginal rate now, so it helps most when your rate is lower than your heirs' combined outcome in the table. Nominating a spouse first uses the unlimited spouse exemption and defers the whole question to the second death. Gifts made while living leave the estate after seven years, with their own rules and the obvious cost that the money is given away. Taking tax-free cash and gifting it combines the two. Each of these interacts with the rest of your estate, and the arithmetic that decides between them is exactly what the withdrawal-order page and the app's estate view are for. What none of them changes: pensions remain an excellent way to fund your own retirement; what ended is their second career as an inheritance wrapper.
Methodology. Stack computed as inheritance tax at 40% on the pension's share of the taxable estate, then income tax at the beneficiary's marginal rate (20%/40%/45%) on the remainder as drawn; death before 75 assumes lump sums within the £1,073,100 lump sum and death benefit allowance. Figures from rules bundle UK-2026.1.1: nil-rate band £325,000, residence nil-rate band £175,000, IHT rate 40%, pension-in-estate effective 6 April 2027 (Royal Assent 18 March 2026). Scenario assumes the estate already exceeds its nil-rate bands and ignores growth between death and drawing. All arithmetic machine-checked before publication. Published 8 August 2026 · figures last verified 8 August 2026.
Sonuswealth is pre-launch. The app computes your estate's position with the 2027 rules applied to your actual pots, bands and beneficiaries.