Your pension will likely provide a notable portion of your income in retirement. That’s why it’s so important to pay careful attention to how much wealth you’re building in your pension throughout your working life.
You’ll also need to be aware of any legislative changes that might affect your ability to grow your pension savings and access them once you retire.
Here are three upcoming pension changes you might need to prepare for.
1. New rules about pensions and Inheritance Tax
In the past few years, the government has announced several adjustments to Inheritance Tax (IHT) rules to increase revenues. A change to the tax treatment of your pensions after you pass away, coming into effect from April 2027, is one of the most notable.
As of 2025/26, your beneficiaries will pay IHT on any portion of your estate that exceeds thresholds called the “nil-rate bands”.
The standard nil-rate band is £325,000, and you may also benefit from up to £175,000 of the “residence nil-rate band” when passing your main home to a direct descendant such as a child or grandchild.
This means you can leave a total of £500,000 before triggering an IHT charge. Additionally, you can pass your entire estate to a spouse or civil partner without IHT, and they can claim your unused nil-rate bands.
Consequently, you could leave a total of £1 million as a couple without IHT.
Any wealth that exceeds this threshold is subject to 40% IHT.
Until April 2027, your pensions are not included in any IHT calculations, making them an excellent estate planning tool. While your beneficiaries may pay Income Tax when drawing from an inherited pension, they won’t pay any IHT.
However, the government confirmed that from April 2027, this exemption will end, meaning it could be more difficult to mitigate the IHT your family will pay on your estate.
What your beneficiaries could pay before April 2027
If you had £500,000 left in your pension when you passed away, the full amount would be exempt from IHT. Depending on your age when you pass away, your beneficiaries may pay Income Tax when they eventually access the wealth.
If you pass away before 75, there is no Income Tax to pay.
If you pass away after 75, your beneficiaries will pay Income Tax at their marginal rate.
This means that a higher-rate taxpayer would pay £200,000 in Income Tax (40% of £500,000), leaving them with £300,000 from the inherited pension.
What your beneficiaries could pay after April 2027
Using the same example, after April 2027, your beneficiaries would pay 40% IHT on the inherited pension if you’ve already used your nil-rate bands on the rest of your estate.
This means they would retain £300,000.
Then, if you passed away after 75, a higher-rate taxpayer would pay an additional £120,000 in Income Tax (40% of £300,000).
This means they would only receive £180,000 from the original £500,000 left in your pension.
Fortunately, there is still time before the new rules take effect. We can review your estate plan with you and explore various ways to potentially mitigate IHT.
2. Ongoing increases to the State Pension Age
While it may not form the majority of your income in retirement, the State Pension can offer a useful supplement to your private pensions.
In 2025/26, the full State Pension amount is £230.25 a week. The triple lock means this amount normally increases each year by the higher of:
- Inflation
- Average wage growth
- 2.5%.
You’ll also receive the payments for the rest of your life.
However, the age at which you can start claiming your State Pension is changing. Currently, the State Pension Age is 66, but there will be a phased increase to 67 between 2026 and 2028.
There are also plans to raise it again to 68 between 2044 and 2046, but this is under constant review. The government has suggested that this increase could be brought forward to the 2030s.
It’s important to consider this when deciding how you will draw an income in retirement. If you plan on the assumption that you will receive State Pension payments from 66, you might have a shortfall. This means you may need to draw additional wealth from your private pensions for a period to plug the gap until you reach State Pension Age.
We can support you here by using cashflow forecasts to determine what level of income you can afford to draw from your pensions and other savings each year. That way, you can ensure that you’re able to maintain your standard of living until you can claim State Pension payments.
3. A rise in the normal minimum pension age
The normal minimum pension age (NMPA) is the age at which you can start drawing from your private pensions.
In 2025/26, this is normally 55. However, there are some exceptions, and you may be able to access your pension earlier if you fall ill or are in a profession with a “protected pension age”.
The NMPA will increase to 57 from April 2028, which might affect your plans.
For instance, if you want to stop working at 55, you won’t be able to access your pension savings for the first two years of your retirement. Consequently, you’ll need to consider how you fund your lifestyle.
For example, you might decide to delay your retirement for two years. Alternatively, you could draw from other savings, such as your ISAs, until you’re able to access your pension.
Again, we can review your finances with you and discuss ways to generate an income so you can still meet your retirement goals, despite any changes to the NMPA.
Get in touch
We can work with you to prepare for these pension changes.
Please get in touch to find out how our team of VouchedFor Top Rated planners could help today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, or tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.