For many doctors, dentists, and other healthcare professionals, pensions have long been one of the most tax-efficient ways to build and preserve wealth. Whether you’ve accumulated benefits through the NHS Pension Scheme, private pensions, or a combination of both, retirement savings have traditionally offered not only financial security in later life but also an effective way to pass wealth to future generations. Unfortunately, that long-standing advantage is about to change.
Important information
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice, tax planning, estate planning, or trust planning. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
A pension is a long-term investment not normally accessible until age 55, rising to age 57 from April 2028. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
This article was approved by Best Practice IFA Group Limited on 9 July 2026.
From 6 April 2027, unused pension funds will be brought into the scope of Inheritance Tax (IHT), marking one of the most significant changes to estate planning in recent years.
While the new rules are still subject to final legislation, they could have far-reaching consequences for higher earners, particularly those who have spent decades building substantial pension wealth.
Why does this change matter?
Under the current rules, most pension funds sit outside an individual’s estate for IHT purposes. This has meant many retirees have sensibly chosen to draw on other assets first, allowing their pension to remain invested and, where possible, pass tax-efficiently to beneficiaries.
However, from April 2027, that strategy may no longer be appropriate. Instead, any unspent pension savings could be added to the value of your estate when calculating IHT. If your total estate exceeds the available allowances, the excess is generally taxed at 40%.
For the 2026/27 tax year, the standard nil-rate band remains £325,000, with an additional residence nil-rate band of up to £175,000 when passing a family home to direct descendants. For many medical and dental professionals who own property, have investments, and have built sizeable pension pots, it would not take much to exceed these thresholds.
What about the NHS Pension?
Many NHS clinicians participate in the NHS Pension Scheme, which is a defined benefit (DB) pension rather than a defined contribution arrangement. While the upcoming rule changes will primarily affect pensions that have accumulated as invested funds, certain DB lump sum death benefits will also be liable for Inheritance Tax (IHT). Alongside their NHS benefits, many healthcare professionals also hold personal pensions, SIPPs, or workplace defined contribution pensions which will be brought fully into scope of the estate.
Understanding exactly how these different pension arrangements interact with the new rules will become increasingly important. Those with mixed retirement provision should avoid assuming that one strategy fits all. A comprehensive review alongside a financial adviser can help establish which assets are likely to be affected and whether adjustments should be made before the new rules take effect.
Time to rethink retirement planning
Historically, preserving pension assets for as long as possible often made sound tax planning sense. Going forward, it may become more beneficial for some individuals to access pension funds earlier while retaining other assets that may receive different tax treatment on death.
Of course, every situation is unique. Decisions about pension withdrawals should never be made purely to reduce tax. Cash flow needs, investment growth, income tax implications, and family objectives must be considered together.
Planning ahead could make a significant difference
Although the changes are not set to go into effect until April 2027, waiting until the last minute may reduce your options.
Now is an ideal time to review the likely value of your estate, including pension assets, and assess your potential exposure to Inheritance Tax. For some families, gifting strategies, making use of annual exemptions, or wider estate planning solutions may help reduce future liabilities. Others may simply benefit from restructuring how they intend to use their retirement assets.
As with all financial planning, the right approach depends entirely on your personal circumstances, objectives, and family situation.
Don’t wait until the rules change
With pension and tax legislation continuing to evolve, maintaining regular contact with a financial adviser is more important than ever. Reviewing your retirement and estate planning strategy now can help ensure you’re well prepared for the changes ahead and that your wealth continues to support both your retirement goals and your family’s future. Get in contact with the experts at Dental & Medical Financial Services today.
