A substantial majority of British workers remain unaware of pension reforms that will expose retirement savings to inheritance tax from April 2027, according to new research.
A survey conducted by Barnett Waddingham among 2,000 employees found that 62 per cent of those with defined contribution workplace pensions had no knowledge of the changes.
Chancellor Rachel Reeves announced the policy during her inaugural Budget, altering how unspent pension wealth is treated after death.
From April 2027, funds remaining in private pension pots will be included in estate valuations for inheritance tax purposes.
This lack of awareness risks leaving families facing bills of up to 40 per cent when relatives die.
Currently, private pensions are exempt from inheritance tax, a protection that will be removed under the new rules.
Inheritance tax is charged at 40 per cent on estates valued above £325,000, rising to £500,000 when a primary residence is passed to direct descendants.
Government projections suggest including pension wealth in estate calculations will push an additional 10,500 estates above the threshold by the 2027–28 financial year.
The reforms mark a shift in how retirement savings are treated, turning funds many expected to pass to beneficiaries untouched into taxable assets.
Families who have planned their financial legacies around existing rules may be particularly affected.
The impact is greater where the deceased is aged 75 or over, as beneficiaries must also pay income tax on inherited pension funds.
This creates a scenario in which the same pension savings may be taxed twice.
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Mark Futcher of Barnett Waddingham said: "What was intended as a legacy for family and loved ones could deliver significantly less in practice."
He warned the changes create a "risk for workers and their families of additional tax exposure", with some facing double taxation.
Financial advisers have raised concerns that many savers are not prepared for the implications of the reforms.
Some pension holders have begun withdrawing their 25 per cent tax-free lump sums or increasing drawdowns to reduce potential inheritance tax liabilities.
Wealth managers have also warned the changes could complicate probate processes, particularly for those with multiple pension pots.
Since automatic enrolment was introduced in 2012, many workers have built up several pension accounts across different employers.
Evelyn Partners has cautioned that failing to consolidate these pots could create administrative challenges for families.
Andrew King of Evelyn Partners said: "Where there are several pension pots with different providers, this could not only prove a heavy administrative burden but also potentially hit the estate with interest charges."
He warned families may struggle to meet the six-month deadline for settling inheritance tax liabilities.
The Government has rejected a House of Lords recommendation to extend the payment window to 12 months.
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