Pension beneficiary nominations, wills and the 2027 IHT changes

Beneficiary nominations are an important part of financial planning, yet they are often completed when a pension is first established and then rarely revisited. While the forthcoming changes to the UK Inheritance Tax treatment of pensions have brought this topic back into focus, these changes will not affect every client or adviser, particularly those working with internationally based clients or clients living outside the UK.

The UK Government has confirmed that, 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 Inheritance Tax purposes, fundamentally changing how many UK pension death benefits are treated.

Regardless of jurisdiction, regularly reviewing beneficiary nominations remains good practice. Taking the time to revisit pension death benefit nominations alongside wider estate planning objectives helps ensure benefits are distributed in line with a client’s current wishes and that important documentation remains up to date.

The risk of outdated nominations

Beneficiary nomination forms are often completed when a pension is first established and then forgotten. However, many clients will have experienced significant life events since then, including:

• Marriage or civil partnership
• Divorce or separation
• Birth of children or grandchildren
• Death of previously nominated beneficiaries
• Changes in family circumstances

As pension death benefits can represent a significant proportion of a client’s wealth, advisers should consider whether existing nominations still reflect current intentions. This is particularly important for clients with multiple pension arrangements, including legacy workplace schemes where beneficiary records may not have been reviewed for many years.

Reviewing the wider estate planning picture

While beneficiary nominations remain important, they should not be considered in isolation. The forthcoming legislative changes create an opportunity for advisers to revisit broader estate planning discussions, including:

• Existing wills
• Trust arrangements
• Expressions of wishes
• Intergenerational wealth planning objectives
• Potential Inheritance Tax exposures

For UK clients, advisers may also wish to discuss the forthcoming changes to the Inheritance Tax treatment of pensions where these are relevant to the client’s circumstances. For clients elsewhere, similar reviews can help ensure planning remains aligned with local legislation and personal objectives.

Practical actions for advisers

Rather than being driven solely by legislative change, beneficiary nomination reviews can form part of a broader ongoing client servicing proposition. Regular reviews help ensure client records remain accurate and continue to reflect changing personal circumstances over time. Some practical steps may include:

Annual beneficiary reviews

Introduce a beneficiary nomination review as part of annual client servicing.

Review pension records

Encourage clients to review older pension arrangements and deferred workplace schemes to ensure beneficiary nominations and personal details remain accurate and up to date. Where technical estate planning or tax considerations arise, advisers should consider whether referral to an appropriately qualified specialist is appropriate.

Estate planning reviews

Work alongside solicitors and estate planning specialists, where appropriate, to help ensure wills and pension nominations remain aligned with clients’ objectives.

Client education

Provide proactive communications explaining the upcoming changes and encouraging clients to review their arrangements.

Demonstrating ongoing value

Regular reviews of beneficiary nominations and related documentation provide advisers with an opportunity to demonstrate ongoing value beyond investment performance alone. Helping clients keep records current and ensuring arrangements continue to reflect their wishes can be an important part of delivering good client outcomes, regardless of where they are based.

Beneficiary nominations are often completed once and then overlooked, despite the fact that clients’ personal circumstances can change significantly over time.

By incorporating regular reviews of expressions of wish, beneficiary nominations and related planning discussions into ongoing client servicing, advisers can help ensure that client arrangements continue to reflect their objectives. Where specialist estate planning or tax advice is required, working alongside appropriately qualified professionals can help ensure clients receive the right support.

Developing these review habits creates better client outcomes, strengthens ongoing adviser relationships and helps ensure important planning decisions remain aligned with clients’ evolving circumstances.

Disclaimer

The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought (as well as legal advice where required) in both the UK and any jurisdiction where you are resident.

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