Almost one in three unaware of pension/IHT changes

Almost one in three (32 per cent) people have no idea how upcoming changes to pensions and inheritance tax (IHT) will affect them, research from Hargreaves Lansdown has revealed.

The survey of 2,000 people, conducted by Opinium on behalf of Hargreaves Lansdown in June 2026, found that awareness of the changes varied significantly by tax status and relationship status.

From April 2027, most unused pension funds and pension death benefits will be counted as part of an individual’s estate for IHT purposes.

However, Hargreaves Lansdown found that nearly 40 per cent of cohabitees remained unaware of the potential impact of the change, compared with 30 per cent of married people.

Awareness was also higher among wealthier respondents, with just 3 per cent of additional rate taxpayers saying they were unaware of the changes' impact.

This compares with 23 per cent of higher-rate taxpayers and 35 per cent of basic-rate taxpayers.

Meanwhile, the research also found that almost one in 10 (9 per cent) people believed the change will push the value of their estate into IHT-paying territory, while 6 per cent said they were already likely to be impacted by IHT but expected the change to make their liability worse.

Hargreaves Lansdown head of retirement analysis, Helen Morrissey, said: “IHT may not be an issue for the vast majority of people, but if you do find yourself in the net, then your family could face a nasty surprise bill after you’ve gone.

“From April 2027, unused DC pensions will be counted as part of your estate for inheritance tax purposes.

“It’s a move that 9 per cent of people believe may tip the size of their estate into tax-paying territory. A further 6 per cent believe it could make their current liability worse.”

Morrissey warned that awareness of the change remains low, despite the potential implications for families.

“Almost one third of people have no idea how this change might affect them and their family,” she noted.

“Wealthier people are more likely to have an idea - only 3 per cent of additional rate taxpayers didn’t know.

“This compares to 23 per cent of higher rate taxpayers and 35 per cent of those paying tax at basic rate.

“This is understandable as the more you earn, the more assets you are likely to have. But if you own your own home, and have a decent pension, then it’s something you need to be aware of so you can prepare, and perhaps, more importantly, make your family aware of any potential bill they may have to deal with.”

Last week, the Society of Trust and Estate Practitioners (STEP) called on the government to simplify the planned changes, warning that the proposed framework could create delays, increase costs, and place a significant burden on bereaved families and executors.

Morrissey stressed that IHT can become an issue if an estate is worth more than £325,000, while those passing down a family home to a child or grandchild can also use the residence nil-rate band, worth £175,000.

She added that married couples and civil partners have additional flexibilities, as assets can be passed between them without being subject to IHT, and they can inherit unused portions of each other’s nil-rate bands.

This means a widow or widower can potentially pass on an estate worth up to £1m before IHT becomes payable.

However, Morrissey warned that these flexibilities do not apply to cohabiting couples, even though many remain unaware of the potential impact.

“You can live together for decades but, when one partner dies, there’s potential for a nasty surprise bill at an already difficult time,” she said.

“Worryingly, almost 40 per cent of cohabitees remain in the dark about how these changes might impact them.”

This article originally appeared in our sister publication Pensions Age.

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