For many British expats, a UK pension has long been viewed as one of the most tax-efficient assets to leave behind.

The common planning logic was simple: use other assets first, preserve the pension, let it grow, and pass it on to family if it is not needed during your lifetime.

That logic may now need reviewing.

From 6 April 2027, most unused UK pension funds and pension death benefits are expected to be included within a person’s estate for UK inheritance tax purposes.

For British expats with sizeable SIPPs, old workplace pensions, UK property, children, second marriages or uncertain future residency plans, this could be a significant change.

This does not mean pensions have suddenly become bad. It does not mean everyone should rush to withdraw money. But it does mean your pension planning and estate planning can no longer be looked at separately.

What is changing to UK pensions in 2027?

From 6 April 2027, most unused UK pension funds and pension death benefits are expected to fall within the value of a person’s estate for UK inheritance tax.

That means if your estate is above the available inheritance tax allowances, your pension may increase the amount of inheritance tax your estate has to pay.

This matters because many UK pensions have historically sat outside the estate for inheritance tax purposes.

For British expats, the issue is often more complex because they may still have UK pensions, UK property, UK family connections and UK inheritance tax exposure while living overseas.

Why this matters for British expats

Many British expats assume that living outside the UK means UK inheritance tax is no longer a major concern.

That can be a dangerous assumption.

UK inheritance tax is not only about where you live today. It can also depend on your domicile, deemed domicile, UK assets, family position and long-term intentions.

You may live in Dubai, Abu Dhabi, Saudi Arabia, Singapore, Switzerland, Australia or elsewhere and still have UK inheritance tax exposure.

A British expat may have:

• a UK SIPP
• old workplace pensions
• UK property
• offshore investments
• children living in the UK
• a spouse or partner from another country
• beneficiary nominations that have not been reviewed for years

Each of these may be manageable on its own. Together, they can create a much bigger estate planning issue than expected.

Why the old pension strategy may need reviewing

For many years, pensions have often been treated differently from other assets.

A common approach was to spend cash, ISAs, investment accounts or rental income first, while leaving the pension untouched for as long as possible.

That could make sense when the pension sat outside the estate.

From April 2027, that approach should not be followed blindly.

If your pension is likely to form part of your estate, preserving it purely for inheritance tax reasons may no longer be as attractive as it once was.

The right strategy may need to change.

Does this mean my pension will definitely face inheritance tax?

No.

The fact that your pension may be included in your estate does not automatically mean inheritance tax will be due.

Inheritance tax depends on your overall estate value, available allowances, who inherits your assets, whether spouse exemptions apply, and how your wider planning is structured.

For example, leaving assets to a spouse or civil partner can often be inheritance tax exempt.

But this may only delay the issue until second death.

The real planning question is not just what happens when you die. It is also what happens when your spouse or partner dies.

That is often where the inheritance tax issue becomes more serious.

Could beneficiaries face both inheritance tax and income tax?

Potentially, yes.

In some cases, inherited pension funds may be subject to inheritance tax as part of the estate and then income tax when beneficiaries draw money from the pension.

The outcome will depend on the age of the pension holder at death, the type of pension, who inherits it, and how benefits are taken.

This is one reason the change matters.

Families could be left dealing with inheritance tax, pension rules, income tax and estate administration at the same time.

Who is most likely to be affected?

The 2027 pension inheritance tax changes may be particularly relevant if you are a British expat and:

• you have a large UK SIPP
• you have old UK workplace pensions
• you own UK property
• you have children you want to leave assets to
• you are divorced or remarried
• you have children from a previous relationship
• you have a younger spouse
• you live outside the UK but may return one day
• you are unlikely to spend your pension in full
• your estate may already be close to or above the UK inheritance tax threshold

The people most at risk are often the ones who do not realise this applies to them.

A UK property, pension, cash and investments can quickly create a meaningful estate.

Should British expats withdraw their UK pension before 2027?

Not automatically.

This is the mistake I expect some people to make.

They will hear that pensions may fall inside the estate from 2027 and immediately think they should take the money out.

Sometimes drawing pension income earlier may make sense.

But withdrawing money from a pension can create other problems. It may trigger income tax, reduce retirement security, move money from a tax-efficient pension into your personal estate, or create poor decisions made purely for tax reasons.

The better question is:

What is the pension actually for?

If the pension is needed for your retirement income, it still has an important job.

If it is unlikely to be spent and is mainly a legacy asset, the strategy may need reviewing.

What should you review before April 2027?

If you are a British expat with a UK pension, these are the key areas to review.

1. What is your UK pension worth?

Start with the basic number.

Many people have multiple pensions and do not know the total value. Before making decisions, you need a clear picture of what you actually have.

2. What type of pension do you have?

A SIPP is different from an old workplace pension. A defined contribution pension is different from a defined benefit pension.

The type of pension matters because the rules, benefits and planning options can differ.

3. Who are your nominated beneficiaries?

Your pension beneficiary nomination tells the provider who you would like to receive the pension benefits when you die.

This should be reviewed regularly, especially after marriage, divorce, remarriage, children, pension transfers or moving overseas.

4. What is your total estate worth?

Your pension is only one part of the picture.

You need to consider UK property, overseas property, pensions, cash, investments, ISAs, offshore bonds, business assets and life insurance.

Many inheritance tax problems become obvious only when everything is added together.

5. Are you UK domiciled or deemed domiciled?

Being non-UK resident does not automatically remove UK inheritance tax exposure.

Many British expats remain UK domiciled even after living overseas for many years.

Your domicile position can affect whether UK inheritance tax applies to your worldwide estate or only certain UK assets.

6. Do you still need the pension for retirement income?

If you need the pension to fund retirement, the priority is income security.

If you do not need it, or only need part of it, the conversation may shift towards estate planning, beneficiary planning, gifting, tax sequencing and spouse protection.

7. What happens on first death and second death?

Many couples focus only on what happens when the first person dies.

But the bigger inheritance tax issue often appears when the second person dies.

Leaving assets to a spouse or civil partner may be tax-efficient on first death, but it can leave the surviving spouse with an even larger estate later.

8. Could life insurance or gifting help?

In some cases, life insurance written in trust may help provide funds to cover a future inheritance tax bill.

Lifetime gifting may also help some families reduce future inheritance tax exposure.

But both need careful planning. You should not give away money you may later need, and insurance depends on age, health, affordability and underwriting.

Common mistakes British expats make

The most common mistakes are:

• assuming non-UK residence means no UK inheritance tax
• assuming pensions will always remain outside the estate
• preserving pensions without reviewing the new rules
• taking pension withdrawals without understanding income tax
• forgetting to update beneficiary nominations
• ignoring second marriages and blended family risks
• looking at pensions separately from property and investments
• assuming the spouse exemption solves everything
• not reviewing planning before 6 April 2027

Most of these mistakes are avoidable if reviewed early enough.

A simple example

Imagine a British expat living in Dubai.

They have a UK SIPP worth £900,000, UK property worth £700,000, offshore investments worth £400,000 and two adult children.

Before the 2027 changes, the pension may have been viewed mainly as a tax-efficient asset to leave behind.

After the change, that same pension may form part of the estate for inheritance tax purposes.

That could materially change the estate planning picture.

The answer may not be to withdraw the pension. It may not be to transfer it. It may not be to gift aggressively.

The answer is to review the whole structure and understand what role the pension should now play.

Is a UK pension still worth keeping?

Yes, in many cases.

UK pensions can still be extremely valuable. They can offer tax-efficient investment growth, flexible retirement income, investment choice and long-term retirement structure.

The 2027 change does not mean pensions are no longer useful.

It means they may no longer be as powerful as an inheritance tax shelter.

That is a different point.

What should British expats do now?

If you have a meaningful UK pension and live overseas, the next step is not to panic.

The next step is to review.

A sensible review should answer:

• What pensions do I have?
• What are they worth?
• Who are the beneficiaries?
• What is my total estate worth?
• Am I likely to have a UK inheritance tax issue?
• Do I need the pension for income?
• What happens on first death and second death?
• Would my children face tax or delays?
• Does my will match my pension planning?
• Does my plan still work if I return to the UK?

These questions are practical family questions, not just technical tax questions.

Who gets what? When do they get it? How much tax might be due? Would they know what to do?

That is what good planning should solve.

Final thoughts

For years, UK pensions have often played two roles.

They provided retirement income, and for many families, they also acted as an efficient way to pass wealth to the next generation.

From 6 April 2027, that second role may become less attractive.

For British expats, this is a significant planning moment.

If you have a UK pension, UK property, children, offshore investments or uncertainty around future residency, you should understand how the new pension inheritance tax rules may affect you.

The key is not to panic.

The key is to plan.

Because if your UK pension may no longer sit outside your estate, the question becomes simple:

Does your current plan still make sense?

Frequently Asked Questions

Are UK pensions currently outside inheritance tax?

Many UK pensions have historically sat outside the estate for inheritance tax purposes. From 6 April 2027, most unused pension funds and pension death benefits are expected to be included within the estate for inheritance tax purposes.

What is changing to UK pensions in April 2027?

From 6 April 2027, most unused pension funds and pension death benefits are expected to be brought within the value of a person’s estate for UK inheritance tax purposes.

Will British expats be affected by the pension inheritance tax changes?

Potentially, yes. British expats with UK pensions may still have UK inheritance tax exposure, especially if they remain UK domiciled, own UK assets or have wider UK connections.

Does this affect SIPPs?

Yes. SIPPs are expected to be within the scope of the new rules where unused pension funds remain at death.

Should I withdraw my UK pension before 2027?

Not automatically. Withdrawing pension funds can create income tax and may simply move money from one taxable environment to another. The right approach depends on your wider position.

Could my children pay tax on my pension?

Possibly. If your pension forms part of your estate and your estate exceeds available inheritance tax allowances, inheritance tax may be due. Beneficiaries may also face income tax when drawing inherited pension benefits.

Are death-in-service benefits included?

Death-in-service benefits from registered pension schemes are expected to remain outside the scope of inheritance tax from 6 April 2027.

Do I need to update my pension beneficiaries?

You should review them. Pension beneficiary nominations can become outdated after marriage, divorce, remarriage, children, pension transfers or moving overseas.

Is my UK pension still worth keeping?

In many cases, yes. UK pensions can still be highly valuable for retirement planning. The 2027 changes do not make pensions bad. They simply mean the estate planning treatment may be less favourable than before.

What should British expats do before 2027?

British expats should review their pension value, pension type, beneficiary nominations, wider estate, domicile position, retirement income needs, family situation and future residency plans.