Could multiple pension pots create problems for families?

Throughout their working lives, many individuals will accumulate multiple pension pots, whether through changing jobs, creating personal pensions or employers switching pension providers.

With pension benefits due to be included in estates for Inheritance Tax (IHT) purposes from April 2027, keeping track of multiple pension arrangements is becoming increasingly important. This is particularly relevant given estimates that there are 3.3 million lost pension pots worth more than £30 billion across the UK.

Below, we explore some challenges a personal representative will face when administering someone’s estate after they die outlining the steps individuals can take now to plan ahead.

What potential challenges can personal representatives face?

Identifying multiple pension providers

Unlike bank accounts or property, there is no centralised register of pensions. Therefore, if the deceased individual has accumulated several pensions in their lifetime, all of the pension providers must be identified and traced individually. This can involve reviewing historic paperwork, tracing previous employers and carrying out extensive searches to locate older pension arrangements. The process can be time-consuming and, in some cases, may still result in pension benefits being overlooked.

For example, all pension schemes will likely require separate and differing claims forms to be completed, , further adding complexity during what is already a difficult time for family members.

Missing or outdated nomination forms

Some pensions are distributed via the pension trustees who decide the benefits via nomination forms. If nominations are missing, outdated, incomplete, or if different providers hold conflicting information, there can be delays as the trustees are contacted. It can also lead to further investigations by providers and requests for additional evidence.

Differing tax treatments and benefit options

Each pension pot could have different tax treatments and alternative payment options depending on the type of scheme and the individual’s age at the time of their death. The personal representative would need to liaise with each provider to understand the options available and communicate the tax implications to beneficiaries.

Increased administrative and emotional burden

In a lot of cases, the personal representatives are family members who are grieving at the same time as managing the affairs of their loved one.

Where multiple pension arrangements are involved, the additional administration can significantly increase both the workload and the emotional burden placed on those responsible for handling the estate.

Consolidating pension arrangements where appropriate may help simplify administration and reduce the number of providers that need to be contacted and managed. However, consolidation is not suitable for everyone and may result in the loss of valuable benefits, guarantees or features.

Planning ahead

Taking proactive steps now can make the administration of an estate considerably easier in future.

Individuals may wish to consider:

• Whether pension consolidation may be appropriate, while carefully assessing any benefits, guarantees, charges of features that could be lost.
• Reviewing beneficiary nominations regularly to ensure benefits are paid in line with current wishes, reducing any delays or uncertainty
• Reviewing pension death benefit payment options, to prevent any unwanted tax liabilities.
• Keeping clear records of each pension provider, policy number and contact details and ensuring this information can be located easily by personal representatives
• Sharing information with executors or storing records alongside a will so key details can be accessed when required
• Aligning pensions with wider estate planning strategy to ensure beneficiaries and tax outcomes are optimised

Why planning is becoming more important

Historically, pension benefits have often sat outside an individual's estate for Inheritance Tax purposes.

However, with pension wealth expected to become increasingly relevant to estate planning considerations from April 2027, individuals may wish to take a fresh look at how their pension arrangements fit alongside their broader succession, Inheritance Tax and wealth transfer plans.

Ensuring pension records are organised and up to date not only helps support effective estate planning but can help minimise the payment of income tax and also make the administration process significantly easier for those left behind.

We’re here to help

We help individuals take a proactive approach to retirement, succession and estate planning. Our specialists can assist with:

• Reviewing current pension arrangements
• Assessing whether consolidating multiple pensions into one may be appropriate
• Ensuring beneficiary nominations reflect current wishes
• Integrating pensions into a wider estate and succession planning strategy
• Understanding the potential impact of upcoming Inheritance Tax changes

If you have multiple pension arrangements and would like to review your options or discuss how your pensions fit within your wider estate planning strategy, please get in touch with a member of our specialist Wealth Management team.

Important information

1. This communication is for general information only and does not constitute personal financial or tax advice. You should not act on the basis of this information alone.
2. This content is intended for individuals with investable assets or estate planning considerations and may not be relevant to all readers.
3. Tax rules affecting wealth, including pensions and related death benefit provisions, may change.
4. You should seek regulated financial and tax advice before making any decisions relating to pension or retirement income.
5. The value of investments and any income taken from them can fall as well as rise and you may receive back less than was originally invested.