Go back to insightsInheritance tax and pension reforms face scrutiny in the House of Lords
A House of Lords committee has delivered strong criticism of the government’s proposed changes to inheritance tax (IHT) and pensions.
Although some might assume that members of the Lords have a personal interest in the Chancellor’s plan to bring unspent pension funds into the scope of IHT, the Economic Affairs sub-committee approached its review from a legislative standpoint. After examining the sections of the current Finance Bill affecting pensions and IHT, the committee concluded that “…significant work remains to ensure that these measures work in practice for personal representatives”.
In a report released at the end of January, the sub-committee set out several key recommendations, including:
- Extending the IHT payment deadline: The current six month window for personal representatives (PRs) to settle IHT liabilities should be temporarily extended to 12 months where pension assets are involved, giving scheme administrators time to amend their systems.
- Delaying implementation if guidance is not ready: If the final regulations and guidance on informationsharing between scheme administrators and PRs are not available by April 2026, the committee says it would not be “sensible or appropriate” to introduce the changes in April 2027.
- Improving support for locating pension assets: The committee highlighted the difficulty many people already face when trying to identify their own pensions, noting there is no reason to expect this process to be easier for PRs after death. The forthcoming Pensions Dashboard will not initially grant access to PRs and will exclude pensions already in income drawdown.
- Raising public awareness: The sub-committee warned of “a low level of awareness of the change to the IHT treatment of pensions” and urged the government to launch an information campaign with clear links to further guidance, helping individuals make informed decisions.
- Clarifying the treatment of dependants’ pensions: The committee pointed out inconsistencies in how dependants’ pensions are handled across different types of pension schemes, arguing that some differences go “beyond the stated objective of stopping the use of pensions for tax planning”.
With these changes planned for April 2027, anyone with a pension should seek advice now to understand how their estate planning might be affected. Following its late and politically uncomfortable reversal on IHT agricultural relief, the government is unlikely to revise its stance again on pensions and IHT.
Tax treatment depends on individual circumstances and may change.
The Financial Conduct Authority does not regulate tax advice.
9th April 2026