Jurisdiction(s):
United Kingdom

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What does Recommendations mean? In legal practice, a Recommendation is an EU soft-law instrument used to signal the EU institutions’ preferred approach and to encourage Member States or other addressees to act, without creating enforceable rights or obligations. Provided for by Article 288 TFEU, Recommendations are non-binding, have no direct effect and do not impose legal duties on those to whom they are addressed. They are commonly used to guide policy implementation, align regulatory practice and indicate how existing EU law might be applied. Although lacking legal force, the Court of Justice of the European Union has held that courts should take Recommendations into consideration...

UK pensions: structuring lump sum death benefits through trusts, tax treatment, IHT interaction and April 2027 reforms

Published by a LexisNexis Pensions expert

Practice notes

FORTHCOMING CHANGE: The Finance Bill 2025–26 includes provisions bringing unused pension funds and death benefits within a deceased member’s estate, and thus within the Inheritance tax (IHT) regime, with effect from 6 April 2027.

Under these proposals, unspent pension savings and death benefits will fall within IHT from 6 April 2027. The rules will not cover death-in-service payments to active members in relevant employment, nor a dependant’s scheme pension (defined as a DB scheme spouse’s or dependant’s pension). Existing exemptions, including those for spouses and civil partners, will continue in force. Personal representatives will have primary responsibility for settling any IHT.

For further detail, see:

Practice Note: Inheritance tax and pensions
News Analyses: HMRC—Reforming inheritance tax—unused pension funds and death benefits
HMRC confirms new IHT rules on unused pension funds to apply from 6 April 2027
HMRC policy paper: Inheritance Tax: unused pension funds and death benefits (November 2025)

This Practice Note explains the use of trust arrangements when paying lump sum death benefits from the pension arrangements listed below, to streamline payments and moderate any potential tax charges...

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Web page updated on 22/05/2026

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