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Buying an annuity can take your pension out of your estate, but it is rarely the right move for tax reasons alone. From 6 April 2027, most unused pension funds and pension death benefits count towards your estate for inheritance tax.
A hybrid annuity is a blended retirement income strategy that pairs a guaranteed annuity with retained pension drawdown. From 6 April 2027, most unused pension funds and pension death benefits will sit inside the inheritance tax estate under Finance Act 2026.
Putting pension death benefits into trust can still reduce inheritance tax after 6 April 2027, but only in specific cases. The 2027 reform brings most unused pension funds and lump sum death benefits into your IHT estate, so a spousal bypass trust no longer routes pension money around the estate at the first death.
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