High net worth (HNW) families have been encouraged to act quickly to prepare for a “significant shift” in estate planning strategy ahead of pensions coming into scope of inheritance tax (IHT) from April 2027.

Heligan Wealth Management argued that the UK’s IHT landscape is set for its most profound transformation in decades when unused pension funds and death benefits become subject to IHT in two years time.

Its report, The Pension Revolution, said the change was expected to reshape multi-generational wealth strategies across the HNW landscape and outlined critical planning steps ahead of pensions being included in IHT estates.

While most pension wealth currently sits outside the taxable estate, representing a key component of intergenerational wealth planning, most uncrystallised and unused drawdown funds will be subject to IHT at 40 per cent.

Heligan Wealth Management calculated that a household with a £4m estate, comprising a £2m business, £1m in pension assets, £500,000 in investments, and a £500,000 home, would see its IHT liability increase from around £200,000 under current rules to £1m after the rule change.

“The implications of the forthcoming 2027 IHT changes extend far beyond pensions alone,” commented Heligan Wealth Management client director, Kieran Duffy.

“The 2027 reforms end the long-standing treatment of pensions as a protected inheritance vehicle. Combined with the recent curbs to Business Property Relief and Agricultural Property Relief, families now face a convergence of tax pressures across all asset classes.

“This means a substantial increase in inheritance tax exposure for many HNW families, unless early planning measures are taken.”

Duffy said that HNW families now have a narrow window for strategic response, and urged them to act now to implement mitigation strategies.

These strategies included comprehensive pension and estate valuations to assess exposure, beneficiary nomination reviews to ensure efficiency under the new rules, pension drawdown planning to reduce taxable assets within estates, whole-of-life insurance and trust structures as IHT-efficient replacements for pension death benefits, and lifetime gifting strategies utilising surplus pension income.

Heligan Wealth Management wealth structuring consultant, Martin Wilson, added: “The pension revolution is here, and the question for wealthy families is no longer whether to adapt, but how strategically and comprehensively they can do so before 2027.

“It’s important that HNW families understand that this is not simply a compliance issue, it’s a structural change to how family wealth is preserved. The families who act now, with coordinated professional advice, will not only minimise exposure but also position themselves to preserve more wealth for future generations.

“Early professional advice, cross-asset coordination, and trust-based planning will be vital in mitigating the ‘double taxation’ risk where beneficiaries may face both income tax and IHT on pension withdrawals, a combined effective rate of up to 67 per cent in extreme cases.”

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