What the new inheritance tax rules could mean for SIPP and SSAS clients

In the 2024 Autumn Budget, the Chancellor announced that unused pension savings and some death benefits would no longer be exempt from inheritance tax (IHT) from 6 April 2027. 

This change has significant implications for many SIPP and SSAS clients, particularly those who have considered pension assets as part of wider estate planning.

What has changed since the Budget announcement?

Finance Act 2026 states that liability for any IHT ultimately payable will fall on the deceased’s personal representatives. Where they expect IHT to be due on a pension fund, they can direct the pension scheme administrator to withhold up to 50% of the taxable benefits for up to 15 months from the date of the member’s death. The aim of any IHT due to then be paid directly from the pension scheme to HMRC.

These are helpful from an administration perspective. They mean responsibility for calculating and reporting any IHT sits with the personal representatives, while giving scheme trustees time to value and, where necessary, realise pension scheme assets.

Additionally, where death benefits are subject to both IHT and income tax, the Finance Act 2026 provides for income tax deductions to offset IHT paid, helping to prevent double taxation.

What assets does the pension scheme hold?

Following the death of a member, the pension scheme trustees will need to value the scheme assets and, where applicable, calculate the member’s fund split for the purpose of determining death benefits and reporting this to the member’s personal representatives. With this in mind, SIPP and SSAS members should consider:

• Whether the assets can easily be valued when the time comes. Cash holdings and quoted shares are usually straightforward to value, while unquoted shares and commercial property are likely to require input from professional third parties, such as qualified accountants and surveyors. Members may wish to explore this in advance.
• Whether the assets can be disposed of easily. If assets need to be sold to meet a tax liability, trustees should consider how long this could take.

Can the tax bill be estimated or mitigated?

As the timing of death is unknown, it is unlikely that any future IHT liability can be predicted with complete precision. However, with support from a regulated financial adviser, members may be able to estimate the potential tax position based on their wider wealth, how that wealth is structured, and the pension scheme assets. 

This will also depend on whether any exemptions apply, such as where assets pass to a surviving spouse or civil partner.

A regulated financial adviser may also be able to help members consider steps to reduce a future IHT liability, such as making use of available IHT exemptions, making regular gifts from the estate, or updating their Will.

How will the tax be paid?

In some cases, an IHT bill on unused pension funds or death benefits may be unavoidable. Where this is likely, trustees should consider how any tax payable from the scheme would be funded.

For example:

• Can assets be sold to help meet the liability?
• Can the scheme borrow funds to cover the liability?
• Can the trustees take out suitable life cover to meet the liability?

BW’s SIPP and SSAS pension scheme administrators are not authorised to provide regulated financial advice in relation to these questions. Scheme members should therefore discuss their circumstances and agree a robust plan with their financial adviser.

Any queries about how these considerations relate to your pension scheme should, in the first instance, be directed to your usual client manager.