UK Pension Inheritance Tax 2027: What Expats Need to Know Before the Rules Change... Again

Technical note: This article reflects UK pension and inheritance tax rules as of June 2026. The 2027 pension inheritance tax changes, pension death benefits, beneficiary taxation, long-term UK residence, double taxation agreements, estate planning and overseas residence are complex. The right planning depends on your pension type, residence history, beneficiary position, wider estate, age, health, retirement country, scheme rules and long-term objectives. Personal advice should be taken before changing pension withdrawals, beneficiary nominations, gifting or estate planning arrangements.

How the 2027 UK pension inheritance tax affects expats

From 6 April 2027, pensions lose much of their historic inheritance tax advantage because most unused pension funds and pension death benefits will be brought within the value of a deceased person’s estate for UK inheritance tax purposes.

For many expats, this is a major change in planning logic. Pensions have often been treated as one of the last assets to draw from because unused defined contribution pension wealth could often pass to beneficiaries outside the estate. That assumption now needs reviewing. It may still be sensible to preserve pension wealth in some cases, but the decision should be tested against the new rules, your UK inheritance tax position, beneficiary tax treatment, income needs, scheme rules and wider estate.

The key question is no longer simply, “Can I leave my pension to my family?”

The better question is, should this pension still be preserved for inheritance planning, or should it be used differently during lifetime as part of a wider income, tax and estate strategy?

That question is especially important for expats because residence status, retirement country, beneficiaries, assets, and tax exposure may all span different jurisdictions.

Key takeaways

From 6 April 2027, most unused pension funds and pension death benefits will be brought into the value of the estate for UK inheritance tax purposes.

This does not mean expats should rush to withdraw pensions before the rules change. It means pensions should be reviewed alongside income needs, beneficiary nominations, long-term UK residence, estate value, scheme rules and wider family planning.

Retiring overseas does not automatically remove a UK inheritance tax issue. A British expat living in Dubai, Abu Dhabi, Spain, Portugal, Australia or South Africa may still be within the UK inheritance tax framework depending on their residence history and asset position.

The change may affect older expats with large pensions today, but it may also affect younger expats whose pensions may grow significantly in the coming decades. A pension that feels modest at 35 or 40 could become a major estate planning asset later in life.

For expats, the issue is not only tax. It is also liquidity, administration, beneficiary residence, double-taxation risk, spouse protection, estate coordination, and whether the family can practically receive and manage inherited pension benefits.

This is not a reason to panic withdraw your pension

The 2027 change is a reason to review, not a reason to rush.

For some expats, drawing more pension income before or after the rule change may be sensible. For others, it could be damaging. A pension may still be the right place to hold retirement wealth, especially if you need future income, spouse protection, investment growth, flexible drawdown or beneficiary options.

The danger is reacting to an inheritance tax change without modelling the income tax, investment, estate and lifestyle consequences. Taking money out of a pension can move it into the personal estate, expose it to different taxes, reduce future retirement flexibility, create reinvestment decisions and weaken protection for a surviving spouse.

The correct response is not panic. It is evidence-based planning.

Who is most likely to be affected?

The 2027 pension inheritance tax change is most relevant for expats who have large defined contribution pensions, SIPPs or workplace pensions, significant UK property, estates above the available inheritance tax allowances, adult children as intended beneficiaries, blended families, non-UK spouses, unmarried partners, outdated pension nominations, or a plan to preserve pension wealth mainly for inheritance.

It is also highly relevant to expats who have retired overseas but remain subject to the UK inheritance tax framework under the long-term residence rules. This is one of the most important points. Living in Dubai, Abu Dhabi, Spain, Portugal, Australia, or South Africa does not automatically mean UK inheritance tax has disappeared. The residence history needs to be checked before the pension position can be understood.

Younger expats should not ignore the change either. Someone under 40 with a £200,000 pension may not see themselves as having an inheritance tax issue today, but over several decades, that pension could grow into a much larger asset. Depending on future contributions, investment growth, charges, withdrawals, and retirement age, a pension that looks manageable now could become a £1.5 million or £2 million estate-planning issue in later life.

That matters because the 2027 rules are not only a problem for people approaching retirement. They may also change how younger expats think about long-term pension funding, beneficiary planning, retirement withdrawals, and whether too much wealth is being allowed to accumulate within a single structure without a clear exit strategy.

The change is also relevant to Middle East expats who may currently be able to draw pension income efficiently but intend to retire later in a higher-tax country. For them, the planning question may be whether the pension should remain untouched, be drawn gradually, or form part of a wider restructuring plan before future residence changes the tax position.

The change may be less significant for someone whose pension is mainly needed for their own retirement income, whose estate is below available allowances, whose pension benefits are primarily intended to protect a surviving spouse, or who is clearly outside the UK inheritance tax framework after a long period of non-residence. Even then, nominations, scheme rules, UK-situs assets, and future pension growth should still be checked.

The issue is not just today’s pension value or today’s country of residence. It is what today’s pension could become, where you will be resident when death occurs, and whether the UK still has a claim over the estate.

The biggest misconception: “I live overseas, so UK inheritance tax does not apply”

One of the biggest misconceptions I see among expats is the belief that leaving the UK automatically removes UK inheritance tax from the conversation, and that is not always true.

From 6 April 2025, the UK inheritance tax system moved away from the old domicile-based framework and towards a residence-based framework. For many British expats, this is a major change because the question is no longer simply whether they consider themselves UK domiciled, permanently overseas, or unlikely to return. The question is whether they are treated as a long-term UK resident under the new rules.

Broadly, someone may be treated as a long-term UK resident if they have been a UK resident for at least 10 out of the previous 20 tax years. This matters because a British expat who spent most of their working life in the UK and then moved to Dubai, Abu Dhabi, Riyadh, Doha, Singapore, Spain, Portugal, or Australia may still be within the UK inheritance tax framework for a period after leaving.

That is the point many expats miss. They may be non-UK resident for income tax purposes, living fully overseas, earning overseas, and planning to retire outside the UK, but that does not automatically mean their estate is outside the UK inheritance tax net.

Long-term non-residence also matters. In broad terms, once someone has been a non-UK resident for a sufficient period, their exposure may reduce. But this should not be guessed. The answer depends on residence history, timing, asset location, and the rules that apply on the date of death or transfer.

This is particularly important before the 2027 pension inheritance tax changes. If an expat remains within the UK inheritance tax framework, unused pension funds being brought into the estate calculation could materially change the family’s exposure. If they fall outside the long-term UK residence rules, the answer may differ, although UK situs assets can still be relevant.

The planning point is simple: do not assume that retiring overseas removes the UK inheritance tax issue. Check it.

The concern I see with expats

The concern I see with expats is that many still think about pension inheritance under the old rules. They have been told for years to leave the pension alone, spend other assets first, and allow the pension to pass efficiently to beneficiaries.

That may still be appropriate in some cases, but it can no longer be treated as the default answer. From 2027, the pension needs to justify its role within the wider estate plan.

For some families, the biggest issue will be taxes. For others, it will be liquidity, outdated nominations, a non-UK spouse, adult children in another country, or a pension scheme that cannot pay benefits as the family expects.

That is why this is not just a technical rule change. It is a reason to revisit the whole plan before old assumptions become expensive.

Why this change matters so much

For years, many pension planning conversations were shaped by a simple idea: spend other assets first and preserve the pension for last.

That logic was not always wrong. Pensions could offer tax-advantaged investment growth, flexible drawdown, beneficiary nominations and, in many cases, favourable death benefit treatment. For wealthier families, pensions could become both a retirement income vehicle and a legacy planning asset.

From 2027, that logic becomes less straightforward. If most unused pension funds are included in the estate for inheritance tax purposes, a pension may no longer sit neatly outside the estate simply because it is a pension. The government has said the change is intended to remove distortions that led to pensions being used and marketed as a tax-planning vehicle for transferring wealth rather than funding retirement.

That does not mean pensions become bad. It does not mean pensions should be emptied before 2027. It means the old assumption that “pension equals outside the estate” may no longer be safe.

For expats, the real issue is whether the pension is still being used in the best order, for the right reason, and under the right residence and beneficiary-planning assumptions.

What is changing from 6 April 2027?

From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of the deceased person’s estate for inheritance tax purposes.

In practical terms, this means the pension may be included in the estate calculation. If the total estate, including the relevant pension value, exceeds available allowances and reliefs, inheritance tax may be due.

HMRC has confirmed that personal representatives, rather than pension scheme administrators, will be liable for reporting and paying any inheritance tax due on unused pension funds and pension death benefits. Death in service benefits payable from a registered pension scheme are intended to remain outside the value of the estate for inheritance tax purposes.

For expats, this should not be viewed only as a UK tax technicality. It affects how pensions are used during a lifetime, how beneficiary nominations are structured, how much pension wealth is preserved, whether other assets should be spent first, how the estate would fund any tax and whether retirement income should be drawn differently before the rules take effect.

What actually happens when someone dies after 6 April 2027?

For deaths on or after 6 April 2027, all unused pension funds and many pension death benefits may need to be included when calculating the value of the estate for inheritance tax. That means the pension can increase the estate's value, potentially pushing more of it above the available inheritance tax allowances.

The pension may still be paid under the scheme rules, but its value may need to be reported for inheritance tax purposes. The practical issue is that the pension provider, personal representatives, beneficiaries and estate may all become connected. This can create timing, administration and liquidity issues, especially where the estate includes property, illiquid assets, overseas executors or beneficiaries living in different countries.

For expats, this is not just a tax rate problem. It is an administrative problem, a cash-flow problem, and a family coordination problem.

That is why the review should not only ask about the pension's value. It should ask what would actually happen if the pension owner died after the rule change.

Allowances still matter

The 2027 pension changes do not mean every pension will immediately suffer inheritance tax.

The result depends on the total estate and the allowances available. The nil rate band, residence nil rate band, spouse exemption, transferable allowances and any relevant reliefs can all affect the outcome. A married couple or civil partners may be in a very different position from an unmarried couple, a divorced person, a widow or widower, or someone leaving wealth directly to adult children.

For expats, this becomes even more important because UK property, overseas property, pension wealth, offshore investments, and bank accounts may all be held in different places, while the UK inheritance tax calculation may still consider the wider estate depending on long-term UK residence status.

The key point is that pensions should not be reviewed in isolation. They should be tested against the whole estate and the allowances actually available.

Long-term UK residence and long-term non-residence can change the answer

For expats, the 2027 pension inheritance tax change cannot be reviewed properly without first understanding whether UK inheritance tax applies.

From 6 April 2025, the UK moved to a residence-based inheritance tax system. Broadly, the key test is whether someone is treated as a long-term UK resident. If they are, their worldwide estate may be within the UK inheritance tax framework. If they are not, the UK position may be more limited, although UK-situs assets can still be relevant.

This is where many expats get caught out. They may no longer live in the UK. They may have no UK salary, no UK home, no immediate intention to return and no sense that the UK is still their financial base. But inheritance tax does not simply ask where they live today. It looks at the residence history.

A British expat who has spent decades in the UK and then moved overseas may remain exposed for a period after leaving. Someone who has been genuinely non-UK resident for many years may be in a different position. That distinction will matter enormously once pensions are included in the estate calculation from 6 April 2027.

Long-term non-residence is therefore just as important as long-term residence.

If someone has been outside the UK for long enough, their UK inheritance tax exposure may be reduced. But this should not be assumed based on lifestyle, nationality, visa status or where they intend to retire. It should be checked against the residence rules and the date at which the tax position is being tested.

For Middle East expats, this is particularly relevant. Many expats move to the UAE, Saudi Arabia, Qatar or Bahrain in their 40s, 50s or 60s after spending most of their adult life in the UK. They may retire overseas and assume they no longer have a UK inheritance tax problem. In reality, their residence history may mean the UK still matters, and from 2027 their pension could become part of that calculation.

A proper pension inheritance tax review should therefore answer three questions before anything else:

1. Are you currently within the UK inheritance tax framework?

2. If not, when did that change, and are UK situs assets still relevant?

3. If yes, how does bringing unused pension funds into the estate from 6 April 2027 affect the total family position?

Without that answer, any discussion about pensions, beneficiaries, withdrawals or estate planning is incomplete.

The estate may need liquidity to pay the tax

One overlooked issue is liquidity. Inheritance tax is not only about how much tax is due. It is also about how the tax is paid.

If a pension is included in the estate calculation, it may increase the inheritance tax bill. But the estate may not have enough cash immediately available to pay that bill, especially where wealth is held in property, pensions, offshore investments, business interests or assets spread across several countries.

This is where a family can end up asset-rich but cash-poor at exactly the wrong time. The pension increased the tax bill, but the estate does not have the cash to pay it without selling property, disrupting investments, or leaving beneficiaries waiting.

For expats, this is especially important because executors and beneficiaries may be in different countries, probate may take longer, and assets may not be easily accessible. A good estate plan should therefore consider not only the tax exposure, but also how the tax would actually be funded.

The change affects pension income planning, not just death benefits

Many people hear “pension inheritance tax” and assume the only issue is what happens after death. That is too narrow.

The 2027 change may affect how much pension income is drawn during a lifetime. Historically, some people deliberately spent cash, ISAs, investment accounts or property wealth first while preserving pension funds for beneficiaries. From 2027, that order may need to be reconsidered, as leaving pension wealth untouched may no longer offer the same inheritance tax advantage.

That does not mean the answer is to drain the pension. A pension may still be a valuable retirement income structure, especially if it offers flexible drawdown, investment choice, beneficiary drawdown options and tax-efficient income planning. But the decision to preserve it should now be evidence-based, not based on old assumptions.

For some expats, drawing more pension income during their lifetime may be sensible. For others, preserving the pension may still be the right choice. The difference depends on tax residence, retirement spending needs, age, health, beneficiaries, estate size, investment risk, and other available assets.

The question is not pension or no pension

After 2027, the question is not whether pensions are good or bad. The question is whether each pound of pension wealth is sitting in the right place for the job it needs to do.

Money left inside a pension may still benefit from tax-advantaged growth, flexible drawdown and beneficiary options. Money drawn from a pension may create greater lifetime flexibility, allow gifting, reduce future pension value, or support spending while residing in a lower-tax country. But once drawn, it may sit inside the personal estate unless used, gifted or structured properly.

That means the planning decision is not simply whether to withdraw. It is whether the pension wrapper still adds enough value compared with the alternatives.

A pension can still be excellent for retirement income. It may still be useful for spouse protection. It may still have a role in family legacy planning. But after 2027, it should have to prove that role rather than inherit it from the old rules.

Age 75 becomes even more important

Age 75 already matters for pension death benefit tax.

Under current rules, inherited pension benefits are generally taxed differently depending on the type of pension, type of payment and the age of the pension owner at death. Broadly, benefits paid after death before age 75 can be more favourable than benefits paid after death at age 75 or over, although the exact treatment depends on the pension, the type of benefit and the rules in force.

From 2027, the estate position may also need to be considered. That means an inherited pension could, in some cases, be subject to inheritance tax in the estate and to income tax when benefits are received by beneficiaries.

This is particularly important where adult children are intended beneficiaries. A surviving spouse or civil partner may be in a very different position from adult children or other non-spouse beneficiaries. The planning question before age 75 should not be, “How do I avoid tax at all costs?” It should be, “How should lifetime income, spouse protection, beneficiary access and estate tax exposure be balanced before the options narrow?”

Spouse and non-spouse beneficiaries should not be treated the same

Beneficiary planning becomes more, not less, important after the 2027 changes.

A surviving spouse or civil partner may have different inheritance tax and income needs from those of adult children, unmarried partners, siblings, grandchildren, or other beneficiaries. In some cases, preserving pension wealth for a spouse may still be sensible because the spouse may need the income, benefit from pension flexibility, or face different tax treatment. In other cases, leaving a large pension fund to adult children or non-spouse beneficiaries after age 75 may create a much less favourable tax outcome.

For unmarried partners, the position can be particularly sensitive. A long-term partner may be financially dependent, but they do not automatically receive the same inheritance tax treatment as a spouse or civil partner. If the pension nomination, will, and wider estate plan are misaligned, the outcome may differ significantly from what you assumed.

For expats with non-UK spouses, cross-border planning can also be more complex. The spouse may live outside the UK, have a different tax residence, or be subject to local succession rules. A pension nomination may help direct pension benefits, but it should not be treated as a substitute for coordinated estate planning.

The beneficiary nomination is therefore not just a form. It is part of the estate planning architecture.

Beneficiaries may not live in the same tax system

Many expats assume the question is only whether the UK taxes the pension. In practice, the beneficiary’s country of residence can also matter.

If adult children live in the UK, the inherited pension may be taxed one way. If they live in Australia, Spain, France, the US, South Africa, or elsewhere, the local treatment may differ. The beneficiary may have reporting obligations, local tax exposure, currency issues, or difficulty receiving and managing pension benefits from a UK provider.

This matters because a pension nomination that looks sensible from the parent’s perspective may not produce the cleanest outcome for the beneficiary. The estate plan should therefore consider not only who receives the pension, but where they live, how they may be taxed, and whether they can practically access and manage the inherited pension.

For internationally mobile families, the wrong beneficiary structure can create confusion at exactly the point when the family needs clarity.

Scheme rules still decide what beneficiaries can actually receive

Even if the tax position is understood, the pension scheme rules still matter.

Some pensions may offer beneficiary flexi-access drawdown. Others may only offer a full return of funds or have more limited options. Older workplace pensions may not provide the same flexibility as modern SIPPs. Some providers may have restrictions for non-UK resident beneficiaries or require additional documentation.

For expats, this is important because a beneficiary nomination is only useful if the scheme can pay benefits as the family expects. A pension review should therefore check the death benefit options for each scheme, rather than simply assuming that all pensions work the same way.

The question is not only, “Who is nominated?” It is also, “What can they actually receive, when can they receive it, how will it be taxed, and can the provider deal with them if they live overseas?”

Defined contribution pensions are most directly affected

The 2027 change is most commonly discussed in relation to defined contribution pensions because these often have an identifiable fund value that may remain unused at death. SIPPs, personal pensions and many workplace pensions can therefore be central to the review.

If a defined contribution pension has been deliberately preserved for children or other beneficiaries, the planning logic needs to be revisited. The same pension may still be useful, but the case for preserving it must now be weighed against income needs, tax exposure, future residence, beneficiary tax treatment, scheme rules and other assets.

This is especially relevant for expats with SIPPs or consolidated pensions. A pension that was previously viewed as a highly efficient legacy asset may now need to be reviewed as part of the total estate rather than separately.

Defined contribution pensions can still be valuable retirement planning assets. The point is that, from 2027, they should no longer automatically be treated as the final asset to draw simply because previous rules made them attractive for inheritance planning.

Defined benefit pensions need a different discussion

Defined benefit pensions are different because they are usually an income promise rather than an unused investment fund.

A Final Salary scheme may provide a spouse pension, a dependant pension, a guarantee period, or a lump sum, depending on the scheme's rules. The value is often in the guaranteed lifetime income and survivor benefits, not in leaving an unused fund to children.

For expats, defined benefit pensions should still be reviewed, but the question is different. The adviser should assess the income, inflation linking, spouse protection, dependant benefits, tax treatment in the retirement country, currency exposure and how the DB income interacts with other pension and estate planning decisions.

A DB pension should not be forced into the same discussion as a flexible pension pot.

QROPS and offshore pension structures need a fresh review

Some expats transferred pensions offshore many years ago into QROPS or other overseas pension structures. Some may also hold older QNUPS arrangements. The 2027 inheritance tax changes make it important to review exactly what the structure is, where it is established, whether it remains qualifying, how benefits are treated, and how the member’s UK residence status affects the estate position.

A review should not simply ask, “Is this offshore?” or “Is this a QROPS?” It should ask whether the scheme is UK or non-UK established, whether UK inheritance tax can still apply, what benefits are payable on death, who controls the payments, whether the administrator can evidence the position, and how the pension fits alongside the member’s wider estate.

For expats who have held offshore pension structures for many years, this may not be obvious from the annual statement, which, in reality, provides surface-level details. Older advice may also have been based on rules or assumptions that no longer apply.

This is a high-value review area for expats because offshore does not automatically mean outside the problem.

Pensions should no longer be reviewed separately from the estate

The biggest planning mistake after 2027 would be to review the pension in isolation.

If pensions are included in the estate calculation, they need to sit alongside property, cash, investments, business interests, life cover, trusts, gifts, wills, residency, beneficiaries, and spending plans. The decision is not simply whether to draw from the pension. It is whether the total estate is structured properly.

For example, if an expat has UK property, a large SIPP, offshore investments and adult children, the best answer may involve more than one planning action. Pension withdrawals, lifetime gifts, investment restructuring, life assurance, spousal planning, wills and residence strategy may all need to be reviewed together. None of those should be used blindly, but all may be relevant.

This is where advice becomes valuable. The value is not in knowing that the pension rules are changing. The value is in understanding what that change means for your income, your beneficiaries and your estate.

Drawing more pension income may help, but it is not always the answer

One obvious response to the 2027 change is to draw more pension income during your lifetime.

Sometimes that may be sensible. If pension wealth will be brought into the estate and you have a genuine spending need, it may be more logical to use the pension for retirement income rather than preserve it untouched. This can be especially relevant where pension income can be drawn efficiently while resident in a low or no personal income tax jurisdiction, such as the UAE, subject to treaty treatment, provider rules and tax coding.

But drawing more pension income is not automatically good planning. It can move assets from a pension environment into the personal estate, create reinvestment risk, increase exposure to local tax or reporting, weaken long-term income sustainability, or reduce protection for a surviving spouse. Drawing too much too early can solve one problem while creating another.

The decision is not whether to empty the pension before 2027. That would be too blunt. The more important issue is whether the current withdrawal strategy still makes sense once income tax, inheritance tax, investment risk, future residence and family objectives are reviewed together.

For Middle East expats, there may be a timing window

The 2027 pension inheritance tax change is especially important for expats living in the Middle East because they may have a temporary planning window.

Someone living in Dubai, Abu Dhabi, Riyadh or Doha may currently be in a low or no personal income tax environment, but later retire in Spain, Portugal, France, South Africa, Australia or the UK. That means the decision on whether to draw pension income, preserve pension wealth, restructure assets, or plan gifts may look different today than it will after relocation.

For a UAE resident planning to retire in Spain, for example, the question may not be only whether a pension is inside or outside the estate. It may also be necessary to determine whether certain pension withdrawals can be made more efficiently before Spanish tax residence begins, and whether the proceeds should then be repositioned into a structure more suitable for Spanish retirement, euro spending, local reporting, and estate planning.

That is a powerful planning concept, but it is not a shortcut. The timing, tax, currency, investment and estate consequences all need to be modelled before action is taken.

Beneficiary nominations need to be reviewed

Pension beneficiary nominations are often forgotten.

Many expats completed a nomination form years ago, when they were UK residents and employed, unmarried or newly married, or before children were born. Since then, they may have moved country, remarried, divorced, had children, built wealth, changed tax residence or acquired assets across several jurisdictions.

After the 2027 changes, beneficiary nominations become even more important because pension planning and estate planning are more closely connected. The nomination should reflect the family structure, current intentions, tax position, spouse protection needs and whether beneficiaries can practically deal with the pension provider from overseas.

This does not mean the nomination alone solves the inheritance tax issue. It does mean an outdated nomination can undermine an otherwise sensible plan.

A pension review should confirm who is nominated, whether successor beneficiaries are available, whether the scheme allows beneficiary drawdown, how death benefits are paid, and whether the nomination still matches your wider estate planning intentions.

Wills, pensions and estate planning need to work together

A pension nomination is not the same as a will.

Pensions are often distributed under scheme rules and at the trustee's or provider's discretion, depending on the arrangement. Wills deal with estate assets. From 2027, if pension funds are included in the estate calculation for inheritance tax, the interaction among wills, pension nominations, executors, personal representatives, and beneficiaries becomes more important.

The person dealing with the estate may need to report and pay inheritance tax on the value of pensions. For expats, this can be administratively complicated. Executors may live in another country. Beneficiaries may not understand UK pension rules. Pension providers may require documentation. Probate, local succession rules and overseas estate planning may all interact.

The planning point is simple: pensions, wills and estate planning should not be left in separate boxes.

Life cover may become part of the conversation

Where the pension change creates or increases a potential inheritance tax liability, life assurance may need to be considered as part of the wider estate plan. This does not remove the tax, but it may help provide liquidity for beneficiaries or executors if structured correctly.

For expats, this needs care. The cover should be reviewed in relation to residence, underwriting, policy jurisdiction, trust availability, currency, premium affordability, and the likely tax treatment of the proceeds. Poorly structured life cover can create a false sense of security.

Life cover is not the solution for everyone, but where a family wants to preserve assets rather than force sales after death, it may be part of the planning discussion.

Gifting and trusts may be relevant, but they are not shortcuts

Some expats may consider lifetime gifts, trusts, or other estate-planning structures before the 2027 changes. These can be useful in the right circumstances, but they can also create tax, control, access, reporting and cross-border complications.

The key issue is that gifting pension withdrawals is not the same as removing wealth from the estate overnight. Timing, survival periods, sources of funds, local taxes, beneficiary residence, and future income needs all matter.

Trust planning also needs specialist advice, particularly for internationally mobile families. A structure that appears sensible from a UK perspective may create problems in another country.

Moving money out of one structure does not automatically improve the estate plan. The test is whether the change leaves the family in a better position after tax, access, control, reporting, residence and future income needs have all been considered.

The rules may change, but the purpose of the pension still matters

There is a danger that people respond to the 2027 changes by becoming overly tax-focused, which would be a mistake.

A pension is still primarily a retirement income vehicle. It exists to help fund later life, not only to reduce inheritance tax. Even after 2027, pensions may still offer valuable features: tax-advantaged growth, flexible drawdown, investment choice, income control, spouse or beneficiary options, and long-term retirement structure.

For some expats, the right answer may be to use more of the pension during their lifetime. For others, preserving pension wealth may still be suitable. Some may need to update nominations, adjust withdrawals, restructure investments, consider life cover, review wills, or coordinate pension planning with a future move.

The point is not that pensions have become bad estate planning assets. The point is that the old estate-planning advantage may no longer be strong enough to drive the overall strategy.

A simple example: why the answer changes

Consider yourself in the shoes of a British expat aged 58 living in Dubai with a large defined contribution pension (or SIPP), UK property, offshore investments, and two adult children in the UK.

Before the 2027 change, the pension may have been viewed as the asset to preserve until last because unused pension wealth could often pass outside the estate. You may have planned to spend cash and taxable investments first, leaving the pension largely untouched for beneficiaries.

After 2027, that logic needs to be reviewed. If the pension is included in the estate calculation, preserving it untouched may no longer yield the expected inheritance tax advantage. Drawing some pension income during the lifetime may become more attractive, particularly if you can do so efficiently while a GCC resident. But drawing too much could create reinvestment risk, move assets into the personal estate, or weaken long-term income security.

Now add the practical family issue. Ask yourself the following:

• If the estate includes property and long-term investments, but limited accessible cash, who funds the tax?

• Do the executors need to sell assets?

• Can the pension provider pay benefits in the expected format?

• Do the beneficiaries live in the UK or another tax system?

• Does your will align with the pension nomination?

• Are you still within the UK inheritance tax framework because of long-term residence rules?

The best answer is not obvious from the pension statement. It depends on residence status, estate value, beneficiaries, tax treatment, investment strategy, scheme rules, liquidity, age, health, spending needs and where you may retire later.

That is why the pension, estate and income plan need to be reviewed together.

The cost of waiting

The risk of waiting is not only that the rules change. It is that the family discovers the problem too late.

An outdated beneficiary nomination, an unsuitable scheme, a lack of estate liquidity or an untested withdrawal strategy may not matter while everything is theoretical. It matters when the pension owner dies, the estate has to be reported, beneficiaries need access, and the family realises the plan was built around rules that no longer apply.

As John F. Kennedy put it:

“The time to repair the roof is when the sun is shining.”

That is exactly how expats should think about the 2027 pension inheritance tax changes. The planning window exists before the rules take effect, while there is still time to adjust income, nominations, scheme structure, estate liquidity and wider planning. Once the issue becomes real, the family may have fewer options, more administration and less control.

For expats, there is another risk. You may relocate before the review is done. A pension withdrawal that could have been considered while a UAE resident may look very different after moving to Spain, Portugal, France, Australia or the UK. A beneficiary nomination that was simple while the family lived in one country may become more complicated once children, spouses and assets are spread across multiple jurisdictions.

The best time to review this is before 6 April 2027, while there is still time to act.

Common mistakes expats should avoid before 2027

The first mistake is assuming pensions will still sit outside the estate as they often did before. The second is assuming the right answer is to draw everything before the rules change.

Both assumptions can be wrong.

Other mistakes include relying on an outdated beneficiary nomination, ignoring long-term UK residence status, treating spouse and adult children beneficiaries the same, forgetting age 75 income tax treatment, leaving wills and pension nominations uncoordinated, assuming offshore pensions are automatically protected, ignoring scheme death benefit options, and failing to consider how the estate would actually fund the tax.

The biggest mistake is waiting until after the rules change to review the position. Once 6 April 2027 arrives, some planning opportunities may still exist, but others may be narrower, more urgent or harder to coordinate.

Good planning should happen before the deadline, not because there is one universal answer, but because the right answer takes time to build.

What should be reviewed before 6 April 2027?

Before the rules change, expats should have a clear view of five things.

1. Whether they are likely to be within the UK inheritance tax net under the long-term residence rules.

2. What their estate looks like when pensions, property, investments, cash and overseas assets are included.

3. Who is nominated on each pension, and whether the scheme offers the death benefit options the family expects.

4. Whether pension withdrawals should change before or after the rule change, especially if you are currently in a low or no personal income tax jurisdiction.

5. How the estate would actually fund any inheritance tax liability without forcing rushed sales, family conflict or unnecessary delays.

That is not a form-filling exercise. It is a joined-up pension, income and estate planning review.

What a proper 2027 pension inheritance tax review should assess

A proper review should not begin with a product or a withdrawal instruction. It should begin with the estate, the pension and the family outcome.

It should assess whether you are within the UK inheritance tax framework, whether you are a long-term UK resident, what pensions you hold, whether those pensions are UK or non-UK established, who is nominated, what death benefits are available, whether beneficiary drawdown is possible, how old you are, whether age 75 planning matters, what your spouse or partner would need, whether adult children are intended beneficiaries, and how your estate is structured.

It should also review whether pension income should be drawn differently during a lifetime. That includes tax residence, retirement country, double taxation agreement treatment, provider rules, investment risk, currency, spending needs and whether other assets should be used first.

Finally, it should test liquidity.

• If inheritance tax is due, where would the money come from?

• Would the family have access to cash?

• Would assets need to be sold?

• Would life cover help?

• Would gifting or restructuring create a better result, or would it simply move the problem elsewhere?

The value of advice is not in saying the rules are changing. It is in showing what the change means for your estate, your income and your family.

Before the rules change, make the pension prove its role

From 6 April 2027, pensions are still likely to be valuable, but they may no longer deserve the automatic estate planning status many people gave them.

Thomas Sleep works with UK-connected expats across the Middle East to review UK pensions, retirement income, beneficiaries, estate planning and cross-border tax issues in one joined-up plan.

The purpose is not to tell you to draw the pension or preserve it. It is to answer the question properly:

What role should your pension play after 2027: retirement income, spouse protection, family legacy, or a combination of all three?

A proper review should show whether your pension is still being used in the right order, whether your beneficiaries are correctly structured, whether your estate may have a future liquidity problem, whether long-term UK residence rules still bring you within the UK inheritance tax framework, and whether action should be taken while the planning window is still open.

Book a holistic UK pension review with Thomas before 6 April 2027. We will review whether your pension is still being used in the correct order, whether your beneficiaries are correctly structured, whether your estate may face a future liquidity problem, and whether action should be taken before outdated assumptions become expensive.

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Final takeaway

The 2027 pension inheritance tax changes do not mean pensions are no longer useful. They do mean pensions should no longer be treated as automatically outside the estate.

For expats, the impact depends on long-term UK residence, pension type, beneficiary structure, age, retirement country, income needs, scheme rules, estate liquidity and wider family planning. Some pensions may still be preserved. Some may need to be drawn differently. Some beneficiary nominations may need updating. Some estate plans may need restructuring.

The goal is not to react to the rule change in isolation. The goal is to make sure your pension, income, beneficiaries and estate planning still work together after 6 April 2027.

About Thomas Sleep and Skybound Wealth

Living internationally changes everything about how money works.

Income can rise quickly. Tax can fall away. Assets build across countries, currencies, and legal systems. On the surface, life often looks successful. Underneath, complexity accumulates quietly, and small decisions made in isolation begin to shape outcomes years in advance.

Thomas Sleep is a UK-qualified Financial Adviser at Skybound Wealth, specialising in cross-border financial planning for expatriates and internationally mobile families. Based in Dubai, he advises professionals, senior executives, and business owners across the Middle East, the UK, Europe, and offshore jurisdictions.

With over sixteen years of experience living and working abroad, Thomas helps expats bring clarity to complex financial lives. His work spans investment strategy, tax efficiency, retirement planning, and long-term wealth protection, aligning these areas into a single, forward-looking plan that adapts as circumstances and locations change.

Thomas is UK-qualified and regulated and holds the CISI Level 4 Financial Planning &

Advice Diploma. Through Skybound Wealth, he provides regulated advice within a firm known for its strong governance, international regulatory coverage, and client-first approach. His advice is measured, analytical, and outcome-driven, helping expats understand not only what decisions to make today but also how those decisions affect flexibility, tax exposure, and security over the decades that follow.

As both an adviser and an expat himself, Thomas understands where problems typically emerge. Wealth grows faster than planning. Assets are built in silos. Tax considerations evolve quietly until they can no longer be ignored. By the time these issues surface, options are often narrower and more expensive to implement.

Much of Thomas’s work focuses on identifying these risks early and addressing them deliberately. Through Skybound Wealth, he helps expats build resilient portfolios that travel with them, reduce future tax friction, and ensure their wealth supports their family and lifestyle long after their working years end.

This advice is for people who want clarity, control, and confidence that their financial life will continue to work as circumstances change, not just when everything feels stable.

FAQs

Are UK pensions subject to inheritance tax from 2027?

From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a deceased person’s estate for UK inheritance tax purposes. The impact depends on the estate, pension type, residence status, beneficiaries and available allowances.

Does the 2027 pension inheritance tax change affect expats?

Yes, it can. Expats who remain within the UK inheritance tax framework may be affected, especially if they have large UK pensions, UK property, adult children beneficiaries, blended families, non-UK spouses, or wider estates above available inheritance tax allowances.

Does retiring overseas remove UK inheritance tax?

Not automatically. From 6 April 2025, UK inheritance tax is based on long-term UK residence. A British expat may be a non-UK resident for income tax purposes and still be within the UK inheritance tax framework, depending on their residence history. UK situs assets can also remain relevant.

What is long-term UK residence for inheritance tax?

Broadly, an individual may be a long-term UK resident if they have been a UK resident for at least 10 out of the previous 20 tax years. Individuals may remain within scope for a period after leaving the UK, depending on their residence history.

What is long-term non-residence for inheritance tax?

Long-term non-residence matters because someone who has been outside the UK for a sufficient period may see their UK inheritance tax exposure reduce. This should not be guessed. The answer depends on residence history, timing, asset location, and the rules that apply on the relevant date.

Should expats draw down pensions before 2027?

Not automatically. Drawing more pension income may help in some cases, but it can also create tax, investment, estate and income sustainability problems. The decision should be modelled before action is taken.

Do pension beneficiary nominations still matter after 2027?

Yes. Beneficiary nominations remain important because they guide how pension benefits may be paid, who may receive them, whether beneficiary drawdown is available, and whether the nomination still reflects the family’s current intentions.

Does age 75 still matter for inherited pensions?

Yes. Age 75 remains important because inherited pension benefits are generally taxed differently depending on whether the pension owner dies before or after age 75. From 2027, inheritance tax may also need to be considered.

Will spouse beneficiaries be treated differently from adult children?

Often, yes. A spouse or civil partner may have different inheritance tax and income needs from adult children or other non-spouse beneficiaries. Unmarried partners and non-UK spouses require particular care because their estate planning and tax positions may be more complex.

Could younger expats be affected by the 2027 pension inheritance tax changes?

Yes. Younger expats may not have large pensions today, but long-term investment growth and future contributions can turn a moderate pension into a significant estate planning asset later in life. The rules may therefore affect how younger expats think about pension funding, beneficiary planning and long-term withdrawal strategy.

Are QROPS and offshore pensions affected by the 2027 changes?

They may need review. The answer can depend on where the scheme is established, whether it remains qualifying, the member’s residence status, the type of benefits and how UK inheritance tax rules apply. Offshore does not automatically mean outside the problem.

What if my beneficiaries live outside the UK?

Their country of residence may affect reporting, tax treatment, currency, administration and practical access to inherited pension benefits. Beneficiary planning should therefore consider not only who receives the pension, but where they live and how they may be taxed.

What should a pension inheritance tax review include?

It should review long-term UK residence status, pension type, pension location, beneficiary nominations, death benefits, age 75 planning, spouse protection, estate value, UK property, offshore assets, wills, tax residence, withdrawal strategy, estate liquidity and whether pension income should be used differently during lifetime.