Two in five people not confident in six-month deadline to pay pensions IHT bill

Over two in five (43 per cent) of UK adults aren’t confident the six-month deadline for paying inheritance tax (IHT) on unused pension funds will be long enough, new research by Standard Life has shown.

The research also indicated there is limited confidence among older adults, finding that just a third (32 per cent) of over-55s think the family members or friends appointed as personal representatives would be able to successfully manage the payment of any IHT due on pension assets.

From April 2027, personal representatives responsible for administering an estate, typically family members or friends, will need to account for any unused pension savings when determining if the estate exceeds the available IHT nil rate band. Any IHT will be due within six months of the end of the month of death.

The timeline for paying pension-related IHT has attracted significant recent discussion, including from the House of Lords Economic Affairs Finance Bill Sub-Committee, which highlighted the practical challenges personal representatives may face in meeting this deadline.

In response, the Government has confirmed that the standard six month timeline will apply from April 2027, citing the importance of consistency in the treatment of estates for IHT purposes.

Tax and wealth planning specialist at Standard Life, Neil Jones, said that with the April 2027 changes approaching, attention is now turning to the “practicalities” of how IHT on pensions will be paid.

“The Government confirmed last year that responsibility will lie with the estate’s personal representatives, usually family members or friends,” Jones commented.

“One of the biggest challenges will be identifying all the deceased’s pension pots. Those approaching retirement today typically have two or three pensions, but younger generations are expected to have 11 or 12 pots over their working lives, largely due to job mobility and pensions auto enrolment.

“Consolidating pension pots may make things simpler for personal representatives to manage depending on circumstance, but it’s important to understand whether bringing these together could mean losing any valuable features or guarantees before making changes.”

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