From 6 April 2027, unused pension funds — including those held within a Small Self-Administered Scheme (SSAS) — will form part of the deceased’s estate for Inheritance Tax purposes. For directors who have structured their pension with an estate planning objective in mind, this is a significant change that warrants review before the date arrives.
What changes in April 2027
Until April 2027, unused pension funds can pass to beneficiaries outside the Inheritance Tax estate. A SSAS or personal pension that has not been drawn at the point of death can be passed on without an IHT charge on the pension fund itself.
From 6 April 2027, this changes. Unused pension funds will be included in the deceased’s estate for Inheritance Tax purposes. The change applies to defined contribution schemes, including SIPPs and SSAS pensions.
This does not affect the pension wrapper during the director’s lifetime. It does not change how a SSAS operates, how contributions are made, or how the fund is invested. What changes is the IHT treatment of whatever remains in the fund at the point of death.
Business Property Relief does not apply to pension assets. There is no BPR exemption available on a SSAS fund. The full 40% Inheritance Tax rate will apply to the portion of the pension fund that forms part of the taxable estate.
What this means for directors with a SSAS
TLPI does not position a SSAS as an Inheritance Tax planning vehicle. Its primary value is Corporation Tax reduction and direct investment control. But some directors have used a SSAS with the understanding — accurate until now — that unused funds could pass to beneficiaries outside the IHT estate. From April 2027, that advantage disappears.
For directors in this position, the questions to consider before April 2027 are:
- How much of the SSAS fund is likely to remain undrawn at the point of transfer?
- What is the estimated IHT exposure on that amount under the new rules?
- Is the current balance between pension accumulation and other wealth structures still appropriate?
- Does the overall estate planning structure need to be rebalanced?
These are not questions with standard answers. They depend on the individual’s age, health, pension income position, other assets, and intentions for the business.
How the April 2027 change interacts with BPR planning
For directors managing both a trading company and a SSAS, the April 2027 change and the Business Property Relief position interact in an important way.
Prior to April 2027, a director might reasonably hold surplus profits in the SSAS — via pension contributions — rather than in the trading company, on the basis that the SSAS provided both a Corporation Tax benefit and an IHT advantage. From April 2027, the IHT advantage on the SSAS disappears.
Pension contributions continue to make sense for the Corporation Tax benefit. A £100,000 employer contribution saves £25,000 in Corporation Tax. That value does not change. But the rationale for maximising pension accumulation specifically as an estate planning strategy changes fundamentally.
A Family Investment Company (FIC) — or a combined SSAS and FIC structure — may offer a more appropriate balance once pension assets enter the taxable estate. The FIC provides a vehicle for holding surplus cash and investment assets outside both the trading company and the pension, with the director retaining full control.
What to do before April 2027
The time available to review and restructure before April 2027 is limited. Structural changes — including establishing a FIC or adjusting the balance between pension contributions and other profit extraction routes — require time to implement properly.
TLPI’s Lifetime Business Tax Plan (LBTP) addresses both the Corporation Tax position through a SSAS and the estate planning position through a FIC, as a single integrated structure. For directors who are currently maximising pension contributions with an IHT objective in mind, the LBTP provides a framework for restructuring the approach before the April 2027 change takes effect.
If you would like to understand how the April 2027 pension IHT change affects your position and what steps are available, book a free 15-minute call.
