Customers rush to buy life insurance as April 2027 pension tax change looms
Royal London reports a surge in protection sales as families scramble to plan for the new inheritance tax rules on pensions.
Demand for life insurance has surged as customers rush to protect their families against a major inheritance tax change coming next April. Royal London, the UK's largest mutual life and pensions insurer, said it recorded almost treble the new protection business it would normally expect in the first half of 2026, driven chiefly by customers seeking to cover potential inheritance tax bills on their pensions.
The driver is the government's decision, confirmed in the 2026 Finance Act, to bring most unused pension savings into inheritance tax calculations from 6 April 2027. For decades, pensions have been one of the few assets that pass to your family free of inheritance tax, provided the beneficiary designations are in place. That advantage ends next year. For families with meaningful pension savings alongside property or other wealth, the combined inheritance tax bill could be steep: up to 40% on the pension itself, plus income tax when beneficiaries draw it down. Many advisers now recommend taking out a life insurance policy written in trust to provide the cash to settle a predicted tax bill, so beneficiaries don't have to find the money from other sources. The key is writing the policy in trust when you buy it, so the payout sits outside your estate and is not itself subject to inheritance tax.
Based on reporting by Yahoo Finance (August 2026). Information only, not advice.
Information only. This is general information, not financial, tax or legal advice, and not a personal recommendation. Tax rules depend on your individual circumstances and can change. Please speak to a qualified, FCA-regulated adviser or a solicitor before acting.