For years, the standard retirement instruction has been simple: leave your pension until last. Spend your ISAs, draw on your other savings, run down your investments, and let the pension pass on untouched.

The logic was sound. An unused pension sat outside your estate for Inheritance Tax, so it was the most tax-efficient thing you could leave behind. Spend everything else, protect the pension.

From 6 April 2027, that logic breaks.

Most unused defined contribution pension pots will count as part of your estate for Inheritance Tax (IHT), where today they sit outside it. The pot you were told to protect becomes the very thing exposed to a 40% charge. This is one of the biggest shifts to UK estate planning in a generation, and it changes the order in which a lot of people should think about spending their money.

What actually changes on 6 April 2027

Right now, if you die with money still in a SIPP (Self-Invested Personal Pension) or a workplace defined contribution pension, that money generally passes to your beneficiaries outside your estate. It is not counted when your Inheritance Tax bill is worked out.

From 6 April 2027, that treatment ends for most unused pension funds. The pot is added to the rest of your estate, and the standard 40% rate applies to anything above your available allowances.

The allowances themselves are not changing. As a reminder of how IHT is calculated:

• Nil-rate band: the first £325,000 of your estate is taxed at 0%.
• Residence nil-rate band: a further £175,000 where a main home passes to direct descendants (children or grandchildren), subject to conditions.
• 40% on everything above the allowances that apply to you.

Allowances can pass between spouses and civil partners, so a couple can often combine up to £1,000,000 before IHT bites. The point of the 2027 change is not the rate or the bands. It is what now sits inside the pile being measured against them.

The government estimates around 10,500 additional estates will pay Inheritance Tax in 2027/28 as a result. Many of those households do not think of themselves as wealthy. They are people who did exactly what they were told: saved hard into a pension and left it alone.

Why this reshapes decumulation, not just estate planning

Here is the part that catches people out. This is not only an estate-planning story. It changes how you should think about drawing your income in the first place.

Under the old rule, the tax-efficient path was often to leave the pension invested and untouched for as long as possible, drawing from ISAs (Individual Savings Accounts) and other assets to fund your lifestyle. The pension grew, sheltered, ready to pass on.

From 2027, deferring the pension can mean building up a larger pot that is now fully inside your estate. The question becomes a balancing act:

• Draw the pension down earlier and you pay income tax on it now, but you move money out of the IHT net (and can spend it, or gift it within the rules).
• Leave it untouched and it may grow, but a growing unused pot from 2027 is a growing 40% liability.
• Spend or gift from the right pots, in the right order, and you can influence how much of your estate reaches your family rather than HMRC.

There is a further layer for deaths after age 75: beneficiaries already pay income tax on inherited pension withdrawals at their own marginal rate. Stack the new IHT charge on top and the same money can be taxed twice. That interaction is exactly the kind of thing worth modelling before it happens, not after.

None of this is a recommendation to empty your pension. Drawing too fast has its own costs: more income tax today, less growth, and investments that can fall as well as rise while they stay invested. The right sequence depends entirely on your own numbers. But the default of "pension last, always" no longer holds automatically.

A worked example

Consider David, a fictional widower, 70, living in England. He was advised years ago to draw from his ISA and cash savings and leave his SIPP untouched to pass on to his two children. His estate looks like this:

• Home: £450,000 (passing to his children)
• Stocks & Shares ISA and savings: £200,000
• Unused SIPP: £400,000

David has his own nil-rate band of £325,000 and residence nil-rate band of £175,000, so £500,000 of allowances in total. Here is the same estate, under the old rule and the new one.

Same person, same assets, same allowances. The rule change alone adds £160,000 to David's Inheritance Tax bill, purely because the pot he was told to protect is now inside the estate. These figures are illustrative and based on David's stated situation. Your own numbers, and the allowances that apply to you, will differ.

What the table does not show is the alternative. Had David started drawing his pension earlier and used what he did not need within the gifting rules, more of that £400,000 could have moved out of the estate over time, at the cost of some income tax along the way. Whether that trade is worth it depends on his age, his other income, his health, and how much he wants to spend versus leave behind. That is a maths problem, and it is one worth solving on paper before it becomes a bill for your family.

Where planning software earns its keep

This is precisely the kind of question Optiml is built to model. Instead of choosing between "pension first" and "pension last" on instinct, you can see the lifetime tax and estate consequences of each path on your own figures.

Optiml's Estate Projector projects your after-tax estate across your full retirement horizon, and it already reflects the April 2027 pension-in-estate change. The Maximise After-Tax Estate strategy then works the problem the other way around: it models how to sequence drawdown, spending, and gifting so the largest possible amount reaches the people you care about, without sacrificing the retirement you want to live.

Because Optiml optimises decumulation and estate together, you can compare, for example, drawing your pension gradually from 66 against leaving it untouched to 80, and watch what each does to both your income tax today and your Inheritance Tax later. It plans around your goals. It does not recommend specific investments or products, and it will not tell you what to do. It shows you the numbers so the decision is yours.

What to take from this

The April 2027 change does not mean pensions are a bad place to save. Tax relief on the way in and the 25% tax-free element remain some of the best deals in the UK system. What changes is the endgame, and with it the order of operations for a lot of retirement plans.

The households most exposed are the ones running yesterday's playbook without re-checking it: spend the ISA, guard the pension, assume it passes on clean. From 2027, that assumption can quietly cost six figures.

The good news is that this is a known change with a known date. You have time to model it properly, and Optiml is coming to the UK to help you do exactly that.

The pension you protected for your family is still worth protecting. From 2027, protecting it just means planning it, not leaving it alone.