UK pension pots face 40% inheritance tax from April 2027

Starting 6 April 2027, unused UK pension pots and death benefits will be included in a person's estate for inheritance tax purposes, under the UK Finance Act 2026. This ends the decades-old strategy where pensions sat outside the estate, and savers were advised to preserve pensions as legacy vehicles. Above nil-rate thresholds, the pot faces a 40% charge, and for some beneficiaries over 75, pension income tax stacked on top of inheritance tax can push the effective rate as high as 67%.

For Indians who built a UK pension and have returned home, the pot left behind still falls within the UK tax net depending on domicile status. Transferring the pot to an Indian Qualifying Recognised Overseas Pension Scheme before the deadline requires four forms: a member form, a transfer-out form, HMRC's APSS263, and the receiving scheme's administrator form, plus KYC documents. The sequence matters: the Indian plan must be confirmed and QROPS-listed before the UK-side clock starts, as the APSS263 must reach the UK administrator within 60 days of the transfer request.

Once transferred, the pot can be invested in Indian pension plans offering options from pure equity to capital-preservation choices. The right mix depends on the holder's age, time horizon, and risk tolerance. Foreign institutional investors turned net buyers of Indian equities in August 2026, and the RBI's repo rate at 5.25% versus the Bank of England's 3.75% base rate gives rupee-denominated plans a rate advantage.