id
- New research shows over a fifth (22%) of adults have less confidence in pensions due to the upcoming pensions IHT change
- However, official figures show around 7% of estates are expected to be financially affected in the first year of the change
- Overestimation of future IHT liabilities poses risk to retirement income: individuals in their mid-20s could lose out on £5,014 at retirement from pausing pension contributions for just one year – rising to £24,715 for a 5-year contribution break.
The upcoming pensions IHT change in April 2027 is having a wider impact on pensions confidence despite the majority of adults being unaffected, new research from Standard Life finds*.
Around half (49%) of adults say their confidence in pensions remains unchanged, but just over a fifth (22%) say this has reduced since the new rules were announced in the 2024 Autumn Budget.
The change comes against a backdrop of a “perfect storm” for IHT of a frozen nil-rate band (until April 2031) and rising asset values. IHT receipts are projected to increase from £8.7bn in 2025/26 to £14.5bn in 2030/31**.
For those with lower pension confidence, passing on a higher IHT burden tops concerns. This is followed by uncertainty on the new rules and complexities around pensions more generally.
Overestimating IHT liabilities
Forecasts suggest that in 2027/28, around 213,000 estates will include unused pension funds, representing almost one in three deaths in the UK. However, despite the introduction of new IHT rules, more than three-quarters of these estates (~164,000) are still expected to pass on their pension savings free from IHT***. The remaining estates are expected to face a financial impact, either because they become liable for IHT for the first time or because they will pay a higher tax bill.
Most estates with unused pension funds will fall below the available IHT thresholds, including the Nil Rate Band and Residence Nil Rate Band, or assets will pass to a surviving spouse or civil partner, who are typically exempt from IHT. For married couples and civil partners, the combined IHT allowances can allow up to £1 million to be passed on tax-free when a main residence is included.
Impact of pension IHT change on estates in 2027/28
id
Over time, the number affected is likely to rise as frozen IHT thresholds and growing asset values gradually drag more estates into paying IHT. However, the change is most significant for those who had planned to preserve pension assets for IHT purposes, rather than draw on them to provide retirement income. Effective retirement saving and decumulation strategies can help people make the most of their pension wealth and achieve their long-term retirement goals.
Neil Jones,
There is a real risk that the upcoming IHT change could undermine confidence in pensions, with some people considering alternatives for their long-term savings. The research is a timely reminder for the new Prime Minister that even seemingly technical changes to pensions and savings rules can seep into the public consciousness and influence behaviour. Pensions are a long-term investment, often built up over decades, so people need confidence that the rules supporting retirement saving will remain stable.
Moving away from pensions could mean sacrificing a sustainable retirement income to avoid a tax people may never pay.
Pensions are central to retirement planning and one of the most tax efficient ways to build retirement savings. This won’t change post April 2027. They carry the triple benefit of pensions tax relief, long-term gains from compound interest, and employer contributions for eligible employees. Those considering alternatives should carefully weigh up any long-term impact before making decisions.
Those who think they might be impacted should speak to a qualified professional such as a financial adviser or estate planner. For this group, the benefits of pension saving may still outweigh any potential IHT implications, but an adviser will be able to support with each individual circumstance.
Impact of pension pausing
Individuals thinking about pension changes should consider the future impact on retirement income. Standard Life analysis shows that an employee in their mid-20s earning £25k could lose out on £5,014 in today’s money terms at retirement age from pausing pension contributions for just one year, if contributing the auto-enrolment minimum. Pausing for 5-years could means losing out on £24,715.
Total retirement fund at age 68 for 25-year old
| Pension fund at age 68 | Pension fund loss | |
| No pause | £186,037 | - |
| 1 year pause | £181,023 | £5,014 |
| 5 year pause | £161,322 | £24,715 |
Media enquiries
For further information, photos, video content or interviews, contact:
-
Samuel Woods
Public Relations Manager, Adviser, Centre for the Future of RetirementTelephone+44 (0)797 784 4297
Notes to editors:
Standard Life research IHT research was conducted among 2,000 UK adults in February 2026. Findings are weighted to be nationally representative.
**OBR: Inheritance tax - Office for Budget Responsibility
***Inheritance Tax on pensions: liability, reporting and payment — Summary of responses - GOV.UK
Government estimates suggest of around 213,000 estates forecast to have inheritable pension wealth in 2027 to 2028. 10,500 estates will have an Inheritance Tax liability where previously they would not. Approximately 38,500 estates will pay more Inheritance Tax than would previously have been the case. Death projections taken from ONS population projections (National population projections: 2024-based).
Calculations assume the following:
| Starting salary | £25,000 |
| Employer contribution | 3.00% |
| Employee contribution | 5.00% |
| Investment growth | 5.00% |
| Salary growth | 3.50% |
| Inflation | 2.00% |
| Annual investment cost | 0.75% |
Calculations are intended only for the sole purpose of providing an illustration regarding the projection of savings and pensions. They should not be used with the intention to give an accurate representation of real-world outcomes.
id
About Standard Life
Standard Life is a retirement specialist focused entirely on retirement saving and income. We are proud to manage c£300bn in assets on behalf of our 12 million customers1, and we champion the belief that everyone's journey to and through retirement can be better.
We offer our customers a broad range of retirement, investment and protection products across our customer brands which include Standard Life, SunLife, Phoenix Life and ReAssure.
Our vision is to be the UK’s leading retirement savings and income business, building on Standard Life’s leadership positions in the workplace pensions, pension risk transfer and individual annuity markets, and our growing retail business. Our award-winning services are backed by industry leading apps and strong customer service.
As a FTSE 100-listed group, we are using our size, expertise and influence to deliver better outcomes for customers.
We’ve set targets to help an additional three million customers take steps toward a better retirement by 2035. We want to play our part in delivering a net zero economy and managing our impact and dependency on nature to shape the world our customers will retire into.
Standard Life is recognised as a leading employer, with long-standing accreditation as a Living Wage Employer, Living Pension Employer and in 2026 became one of Britain’s Most Admired Companies.