A petition calling on the Government to reconsider new rules allowing pensions to be included in inheritance taxable estates has now exceeded 10,000 signatures. This marks a major milestone, as this is the limit a petition has to pass to trigger a Government response.
Under the new rules set to take effect in April 2027, any unspent pension savings will be counted as part of a person’s estate for inheritance tax purposes. For those aged over 75, this could mean beneficiaries face not only inheritance tax but also income tax when they access the funds — a “double” hit that in some cases, could push the total tax burden to as much as 67%. Campaigners have branded the policy change “unfair”, arguing that it disincentivises people from funding their pensions. Nathan Bridgeman, who launched the petition, said the move “may now result in a disproportionate and unfair double taxation on beneficiaries, which we think results in a disincentive to funding a pension.”
He added: “We think the Government need people to take responsibility for providing income in retirement and the simplest and most effective way for the majority to achieve this is a pension.”
The petition, which will run until February 2026, has reached more than 11,300 signatures so far. You can view it here.
The Government must now respond to the petition. At 100,000 signatures, petitions are considered for a debate in Parliament.
The reforms were implemented to help remove “distortions”, which have led to pension schemes being increasingly used and marketed as a tax planning vehicle to transfer wealth, rather than for funding retirement.
The Government said it also removes “inconsistencies” in the inheritance tax treatment of different types of pensions.
However, the changes have drawn widespread criticism from the pensions industry and other financial experts. Rachel Vahey, head of public policy at AJ Bell, said: “Despite a deluge of criticism, the Government has decided to press ahead with plans to apply IHT to unused pensions on death.
“HMRC has blown its opportunity to bin the original proposals, stubbornly sticking with a system that will create confusion, complexity and additional costs for bereaved families. Options were put forward by the industry which would have been far more straightforward than bringing unspent pensions into IHT, while still raising the same amount of tax.”
Ms Vahey noted that, although most savers will be unaffected and should not need to change their financial plans, some now face difficult choices about how best to arrange their finances.
What rule changes are coming to inheritance tax?
Currently, estates valued over £325,000 are taxed at 40%, a threshold known as the “nil-rate” band, which has remained unchanged since 2009. Chancellor Rachel Reeves has confirmed that these thresholds will stay frozen until 2030.
In April 2026, Agricultural and Business Property Relief, which previously offered a full exemption for certain assets, will now only cover the first £1million. Any amount above this will be taxed at a reduced relief rate of 50%, effectively imposing a 20% tax.
In addition, AIM shares, which were previously fully exempt from IHT, will be taxed at 20% if held for at least two years.
From April 2027, inherited pensions will be brought into taxable estates.
