A total of 152,700 estates will come into scope of inheritance tax (IHT) or face additional IHT liability if measures to include pensions in IHT calculations, as was announced in the autumn Budget, come into effect, according to a freedom of information (FOI) request by Interactive Investor.

In the Budget, Chancellor, Rachel Reeves, announced plans to include unspent pension pots and death benefits payable from pensions in the value of estates for IHT purposes from April 2027.

Data from the Office for Budget Responsibility (OBR) showed that an additional 31,200 estates would become liable for IHT from 2027/28 until the end of 2029/30, and a further 121,500 would face an increase IHT liability, if the proposal is enacted.

Interactive Investor’s FOI request also found that the average IHT liability was forecast at £169,000 in 2027/28, increasing by around £34,000 when pension assets are included in the value of estates.

The firm noted that the OBR estimates do not account for potential behavioural changes following the announcement of these measures, such as individuals drawing down pension pots more quickly and/or making greater use of exemptions or reliefs to reduce their estate’s overall IHT liability.

It calculated that someone with a mortgage-free property worth £300,000 and a pension pot of £100,000 would face an IHT liability of £30,000 from April 2027, rising to £110,000 for unspent pensions valued at £300,000.

The calculations assume the full nil-rate band (£325,000) is available and that the additional residence nil-rate band (£175,000) does not apply.

“The government appears to be tightening the screws on IHT, effectively widening the net to capture more estates,” stated Interactive Investor senior personal finance analyst, Myron Jobson.

“With thresholds such as the nil-rate band frozen for years amid rising property prices and inflation, it’s no surprise that more families - many of whom wouldn’t consider themselves wealthy - are being caught in the IHT net. The net will be bursting at the seams by the end of the decade if the latest proposals come to fruition.

“This isn’t just about the wealthiest bearing the burden; it’s part of a broader strategy to replenish the public purse. However, it risks putting additional pressure on middle-class households, who are already navigating stretched finances.

“Including pensions in IHT calculations would mark a seismic shift, particularly for those who have meticulously crafted estate plans around the current rules.

“Pensions have long been considered a tax-efficient vehicle for passing on wealth, with many relying on their flexibility and exemptions as part of their broader estate strategy.

“This change would force many to rethink their plans entirely, potentially accelerating drawdowns during their lifetime to reduce tax exposure. It could also undermine the incentive to save into pensions, disrupting long-term financial security for future generations.”

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