On 27 August 2026 HMRC published Technical Note 2: Further information on Inheritance Tax and Pensions. It is not draft guidance. It is the second operational map for the Finance Act 2026 reform that, from deaths on or after 6 April 2027, pulls most unused pension funds and pension death benefits into the deceased’s estate as notional pension property.
Primary sources: Technical Note 2, the May 2026 Technical Note 1, the Registered Pension Schemes (Provision of Information) (Miscellaneous Amendments) Regulations 2026 (SI 2026/818), Finance Act 2026 ss65–71, ICAEW on how IHT will be charged on pensions, A&O Shearman’s 1 September pensions round-up, HMRC Pension Schemes Newsletter 184, plus private-client notes from Burges Salmon and Anderson Strathern.
If you run executive DC pots, SIPPs, key-person cover or founder succession that still assumes “pensions sit outside the estate,” treat this as an operating risk note.
What changed on 27 August
Technical Note 1 set the architecture: notional pension property, PR liability, beneficiary joint-and-several liability once benefits vest, withholding notices, the pensions direct payment scheme, and income-tax interaction on death benefits.
Technical Note 2 maps the customer journey — five information-sharing stages between personal representatives (or prospective PRs), scheme administrators, insurance companies paying pension-origin annuities, beneficiaries and HMRC:
- Death notification and basic information, including the value of notional pension property.
- Further information when an IHT account is required, including each beneficiary’s share.
- Withholding notice — withhold up to 50% of relevant non-exempt benefits for up to 15 months.
- Payment notice — pay attributable IHT (and interest) from the pot straight to HMRC.
- Lump sum and death benefit allowance checks for tax-free lump sum death benefits.
Stages can run together. Not every death hits every stage. Deadlines are calendar days. The scheme response clock does not start until the administrator has reasonable evidence of identity and authority to act.
SI 2026/818, laid 15 July 2026, hard-wires those duties into the 2006 Provision of Information Regulations. After consultation, HMRC narrowed one friction point: schemes only detail excluded benefits to PRs where an IHT account is actually required.
Why CFOs should care before April 2027
1. Executive wealth and board succession. From April 2027 most unused pension wealth is estate wealth for IHT. Spouse/civil partner exemption still matters. So does charity. So does the split between excluded benefits (many death-in-service arrangements) and funds inside notional pension property. Expressions of wishes written on a pre-2027 assumption need a second pass against actual scheme paperwork.
2. Sponsored schemes and pensions ops. Employers are not the tax collector. Administrators must still build PR verification, information packs, withholding and payment-notice handling. Technical Note 2 includes draft templates. Schemes can use their own forms or digital flows, but the minimum content is mandatory. Ask your DC / Master Trust / executive arrangement administrator for the April 2027 runbook now.
3. Cash at death. IHT on the pension slice is due by the normal six-month-from-end-of-month-of-death deadline if interest is to be avoided. No instalments. No BPR or APR on the underlying pension assets. No loss-on-sale relief on those assets. Quick succession relief and the 36% rate (where charity conditions are met) remain. Someone may need to fund tax while up to half a non-exempt beneficiary’s pot is frozen.
4. PE, founders and MIPs. Soft IHT planning via pension contributions and death benefits hardens in April 2027. Personal DD on founders and rolling managers should already flag large uncrystallised pots and the estate/beneficiary cash requirement on death.
Definitions that will break processes
Technical Note 2 is precise on personal representative versus prospective personal representative:
- Information requests under regs 10C–10F use the wider ITA 2007 s989 definition — prospective PRs can obtain data before a grant.
- Withholding and payment notices under IHTA 1984 (regs 10G–10M) use the stricter s272 PR definition. Acting named executors have title from death and can issue notices before a grant. On intestacy or where no executor will act, s226A(12) prospective PR rules allow withholding notices once identity and authority are evidenced.
Annex A draft evidence guidance — identity, wills, intestacy declarations, multi-executor consent for a lead correspondent — is what schemes will actually use. Stress-test English, Scottish and Northern Irish packs this autumn. Technical Note 3 (autumn 2026) will cover international issues, IHT/income tax interaction, further intestacy points, charities and trusts.
Insurance companies paying annuities bought with pension-origin funds generally share the same information duties. Mapping only “the pension scheme” and ignoring the annuity provider understates the estate.
Withholding and payment notices — the cash map
The withholding notice is a lock, not a payment:
- Cap: up to 50% of each non-exempt beneficiary’s relevant entitlement.
- Duration: up to 15 months from the month of death.
- Purpose: keep value available so PRs are not left funding IHT from the free estate after pot monies have left.
- Limits: not for excluded benefits; not for exempt beneficiaries (spouse/civil partner, UK charity); extra constraints where there is an overseas scheme connection.
The payment notice is the settlement tool under the pensions direct payment scheme: PR or beneficiary can require the scheme to pay attributable IHT and interest to HMRC from notional pension property. Working CFO assumption on a key-person death: half the transferable pot may be frozen, tax is still due on the six-month clock, and BPR does not rescue the pension slice.
Beneficiaries become jointly and severally liable with PRs once benefits vest. Clearance can protect PRs on undiscovered pensions in defined cases; beneficiaries stay liable for those pots. “The estate will sort it” is not a complete answer.
What is still coming — lock-list now
HMRC’s path from Technical Note 2:
- Summer–autumn 2026: process design and support tools.
- Autumn 2026: Technical Note 3.
- Autumn–winter 2026/27: draft guidance; further SIs on split schemes and excepted estates.
- Winter–spring 2026/27: communications to impacted groups.
- Spring 2027: published guidance and tools ahead of 6 April 2027.
Pension Schemes Newsletter 184 sits alongside this with NMPA transitional consultation (replies by 28 September 2026), DB surplus member-payment PAYE/RTI from April 2027, and the 6 October pension savings statement deadline. Crowded calendar. The IHT workstream still owns the estate cash risk.
Before year-end 2026
- Inventory executive and founder pensions that would sit in notional pension property on a post-5 April 2027 death; separate excluded death-in-service cover in writing.
- Re-read nominations against spouse exemption, charity and non-exempt adult children.
- Demand SI 2026/818 readiness from scheme administrators: evidence standards, SLAs, notice templates, annuity coordination, cutover owner.
- Model cash on a stylised key-person death: 40% above available nil-rate bands on the pension slice, no instalments, possible 50% withhold, six-month interest clock, joint liability on vesting.
- Re-size share-purchase / key-man life cover and cross-options if they were calibrated on pre-2027 pension assumptions.
- Add a pensions-IHT line to PE/M&A personal DD for founders and rolling managers.
- Diary Technical Note 3 and the excepted-estates SI. Do not wait for “final guidance” — Technical Note 2 says it is not draft guidance, and the information regulations are already made.
Bottom line
Finance Act 2026 made the policy. Technical Note 2 is the operating manual for the information and cash mechanics. From 6 April 2027, most unused pension wealth is estate wealth for IHT. PRs report and pay. Beneficiaries share liability once benefits vest. Schemes must talk to estates on a statutory timetable. Up to half a non-exempt beneficiary’s pot can be locked while tax is funded. BPR and instalments do not soften the pension slice.
CFOs who still file this under “private client, later” will meet later as a death, a six-month interest clock, a scheme that has never processed a withholding notice, and a board asking why key-person cover was sized on pre-2027 rules. Lock the inventory, the scheme runbook and the cash model now.