More than one in five adults report a decline in pension confidence
The upcoming changes to how pensions are treated for Inheritance Tax (IHT) from 6 April 2027 appear to be having a wider impact on pension confidence, despite most adults being unaffected. New research finds that 49% of adults say their confidence is unchanged, while 22% say it has fallen since the rules were announced in the 2024 Autumn Budget[1].
The changes come as families already face a challenging Inheritance Tax landscape, with the nil rate band frozen until April 2031 and asset values continuing to rise. The research highlights that Inheritance Tax receipts are projected to rise from £8.7bn in 2025/26 to £14.5bn in 2030/31, potentially bringing more estates into the tax net over time.
Understanding the pension changes
For those whose confidence has fallen, concerns about passing on a higher Inheritance Tax bill are the primary issue. This is followed by uncertainty about the new rules and the wider complexity of pensions, highlighting how difficult some people find it to understand how their retirement savings may be affected.
Forecasts in the research suggest that around 213,000 estates will include unused pension funds in 2027/28, representing almost one in three deaths in the UK. However, more than three-quarters of these estates, around 164,000, are still expected to pass on pension savings free of Inheritance Tax.
Who could feel the impact?
Most estates with unused pension funds are expected to fall below the available Inheritance Tax thresholds, including the nil rate band and the residence nil rate band. Pension assets may also pass to a surviving spouse or registered civil partner, who are typically exempt from Inheritance Tax.
For married couples and registered civil partners, in the current 2026/27 tax year, combined Inheritance Tax allowances can allow up to £1m to pass tax-free when a main residence is included. However, as thresholds remain frozen and asset values rise, more estates could gradually become liable to Inheritance Tax.
Reviewing retirement strategies
The changes may be most significant for those who had deliberately planned to preserve their pension assets for future generations rather than use them to fund their retirement. This could mean some savers need to reconsider how they balance retirement income with their plans to pass wealth on.
Where appropriate, effective retirement saving and decumulation strategies could help people make informed decisions about when and how to access their pension savings. Reviewing plans as tax rules and personal circumstances change can also help ensure that retirement wealth is used in line with longer-term goals.
Planning for the future
Although not everyone is expected to be directly affected by the pension Inheritance Tax changes, the uncertainty surrounding them underscores the importance of understanding how pensions fit into broader financial and estate planning.
Reviewing your pension arrangements now will help you understand how the changes could affect your retirement income and your plans to pass on wealth. As individual circumstances differ, taking time to consider your options can help ensure your pension remains aligned with your retirement needs and longer-term financial goals.
Source data:
[1] Standard Life’s February 2026 research surveyed 2,000 UK adults, with findings weighted to be nationally representative. Government estimates suggest around 213,000 estates will have inheritable pension wealth in 2027/28; around 10,500 could face Inheritance Tax for the first time, while approximately 38,500 are expected to pay more.
This article does not constitute tax, legal or financial advice and should not be relied upon as such. Tax and estate planning are not regulated by the Financial Conduct Authority, depend on the individual circumstances of each client, and may be subject to change in the future. For guidance, seek professional advice. The value of your investments (and any income from them) can go down as well as up, which would affect the level of pension benefits available. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028, unless the plan has a protected pension age). The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent finance acts. Investments can fall as well as rise in value, and you may receive back less than you invest.