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Pensions are one of the most complex assets to deal with in estate administration. Most pensions fall outside the estate and are not subject to inheritance tax — but the rules are changing significantly from April 2027. This guide explains the current position, how to value different types of pension, and how to report them correctly. For an overview of all assets to value, see our executor first steps guide.
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The vast majority of UK pensions are held in discretionary trusts. This means the pension fund does not pass under the deceased's will and is not part of the probate estate. Instead, the pension trustees decide who receives the death benefit, guided by:
Because discretionary pension benefits do not form part of the estate, they are currently (pre-April 2027) outside the scope of IHT and do not need to be reported on IHT400 for most purposes. This is one of the reasons pensions have been used extensively in IHT planning.
Important: From April 2027, undrawn pension funds and death benefits will fall within the scope of IHT under proposed HMRC changes. This is a significant reform that is being actively legislated at the time of writing. Seek current professional advice on any estate planning involving pensions.
Certain pension death benefits are included in the estate and must be reported on IHT400:
If in doubt about whether a pension falls into the estate, obtain a copy of the pension rules and consult a specialist pension death benefits adviser.
A defined contribution pension (including personal pensions, SIPPs, and workplace money purchase schemes) has a fund value at any given point. To value it:
Even if the pension falls outside the estate for IHT purposes, you will need this information for the estate accounts and to assist beneficiaries in claiming. See our guide to collecting a pension death benefit as executor.
A defined benefit (final salary or career average) pension provides a guaranteed income in retirement. The death benefits from a DB scheme can be complex:
| Death Benefit Type | What It Is | IHT Treatment |
|---|---|---|
| Death in service lump sum | Usually 2–4× salary paid as a discretionary lump sum | Usually outside estate (discretionary) |
| Spouse's pension | Ongoing pension paid to surviving spouse — belongs to spouse, not estate | Outside estate — belongs to spouse |
| Dependants' pension | Ongoing pension for dependent children or other dependants | Outside estate |
| Pension guarantee lump sum | Remaining guaranteed pension payments paid as a lump sum | May be in estate depending on scheme rules |
Contact the DB scheme administrator and request a letter setting out all death benefits payable, their values, and confirmation of discretionary or binding nature. This is required for the executor's records even where the benefits are outside the estate.
State pension is not an asset that passes on death — it simply stops. The executor must notify the Pension Service as soon as possible to prevent overpayments, which will need to be repaid. Any overpayment already made is a debt of the estate.
A surviving spouse may be entitled to bereavement benefits or an uplift in their own state pension based on the deceased's National Insurance record. This is separate from the estate administration and the surviving spouse should contact the Pension Service directly.
If the pension forms part of the estate (see above), it is reported in Schedule IHT409 (pensions). Even if the pension is outside the estate, HMRC asks in IHT400 whether the deceased had any pension arrangements — you must answer this honestly and explain why the pension is excluded from the estate.
For a full guide to completing IHT400, see our IHT400 form guide. For the overall inheritance tax position, see our inheritance tax guide for 2026–27. Ready to get started? Use our free estate administration tool.
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