Executors Could Find Themselves Legally Responsible For Tax On Pension Pots They Can’t Even Access

The government’s draft legislation to bring unused pension savings into the scope of Inheritance Tax (IHT) from 6 April 2027 is already raising red flags among legal experts.

Responding to the proposals released by the government on 21 July 2025, leading law firm Irwin Mitchell has warned that the suggested framework risks turning estate administration into a legal and emotional minefield.

Expert Opinion

“This is a seismic shift in how estates will be taxed. Executors could find themselves legally responsible for tax on pension pots they can’t even access - while the clock ticks on a six-month payment deadline. It’s a recipe for confusion, conflict, and costly delays.” Andrea Jones, Head of Irwin Mitchell’s Private Client Advisory team

Under the draft rules, personal representatives (PRs) will be responsible for calculating and paying IHT on pension savings—even though they may have no control over those funds. Pension scheme administrators (PSAs) must provide valuations, but with an estimated 3.3 million unclaimed pension pots in the UK worth over £31 billion, tracking them down could be a logistical nightmare.

The situation becomes even more fraught when pension beneficiaries differ from estate beneficiaries. PRs may be forced to dip into estate assets - potentially the family home - to cover tax bills, then chase reimbursement from pension recipients.

Irwin Mitchell urges individuals to act now to mitigate future complications:

- Choose executors wisely: Lay executors may need professional support; professionals will want full visibility of the estate and family dynamics.

- Track down pensions: Use tools like the government’s pension tracing service and document all assets clearly.

- Review IHT exposure: Consider how pension-related IHT will be paid—life insurance in trust may be a solution.

- Plan ahead: Spend or gift pension funds strategically during your lifetime, and seek joined-up legal, tax, and financial advice.

- Update wills and pension nominations so that they are aligned: Small changes can have big tax implications under the new rules.

The draft legislation is open for technical consultation until 15 September 2025.