QNUPS 2027: The Only Pension Structure Still Outside UK IHT
How the 2027 UK Pension Reforms Change Inheritance Tax — And Why QNUPS Is Now Essential for British Expats
From 6 April 2027, the UK will introduce the most significant reform to pension taxation in over a decade — a reform that directly affects how anybody who owns UK investment property that is not a Long-Term Resident in the UK structures their wealth. Under the new rules, most unused pension funds and pension death benefits will be brought into a person’s estate for Inheritance Tax (IHT). As HMRC states clearly:
“From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a deceased person’s estate for Inheritance Tax purposes.”
For many families, this means that pension wealth — once considered outside the IHT net — may now face a 40% tax charge on death.
This article explains what is changing, who is affected, and why Qualifying Non‑UK Pension Schemes (QNUPS) in jurisdictions such as Hong Kong and Guernsey have become one of the few remaining compliant structures for long‑term estate protection.
1. UK Pension IHT Reform 2027
Historically, UK pensions were often used as an intergenerational wealth‑transfer tool. HMRC acknowledges this directly, noting that pensions have been “increasingly used and marketed as a tax planning vehicle to transfer wealth, rather than for funding retirement.”
The new legislation reverses this trend by introducing the concept of “notional pension property” — the total value of all pension arrangements immediately before death. HMRC explains:
“New section 150A… treats a member as being beneficially entitled to the notional pension property… immediately before their death.” This value must now be included in the deceased’s estate for IHT purposes.
The 2027 IHT reforms apply to:
- UK‑registered pension schemes
- Section 615(3) schemes
However, the impact differs dramatically depending on residency status.
2. Can anyone be exempted from paying IHT on their pension? Non UK LTRs using a QNUPS!
HMRC draws a critical distinction between long‑term UK residents and non‑long‑term UK residents:
“For long-term UK residents, Inheritance Tax arises on notional pension property… regardless of where the scheme is situated.” “Non-long-term UK residents will not be charged Inheritance Tax on pension schemes which are established outside the UK.”
This is the foundation of QNUPS‑based estate planning.
Related: What are the New UK Long-Term Residency Rules?
3. Why QNUPS matter more than ever for IHT Planning
A QNUPS is a pension scheme established outside the UK that meets HMRC’s qualifying criteria. Crucially, QNUPS are non‑UK pension schemes — and therefore match the HMRC rules above.
Who should use QNUPS:
A. Non‑long‑term UK residents (i.e., not UK‑resident for 10 out of 20 years )
QNUPS are not included in their IHT assessment because the pension is established outside the UK and they are a non-LTR.
B. Long‑term expatriates
British expats who have lived abroad for many years can use QNUPS to hold:
- Cash
- Investment portfolios
- Property
- Business assets
…as long as contributions are appropriate for retirement provision.
C.Non-LTR UK Property Owners
Holding UK Property in a personal name will automatically be included in the IHT assessment on death.
However, placing your UK Property investment in QNUPS established outside of the UK, as a Non-UK LTR, will exclude your property portfolio value from IHT assessment on death.
4. Comparison Chart: UK Pensions vs QNUPS (Post‑2027 Rules)
| Feature | UK Registered Pension (Post‑2027) | QNUPS (Hong Kong / Guernsey) |
| IHT Exposure | Fully included in estate as “notional pension property” (HMRC: “most unused pension funds… brought within the value of a deceased person’s estate”). | Can include cash, property, portfolios, and business assets (must be for retirement). |
| Residency Requirement | Applies regardless of where the member lived. | Must be a Non UK LTR (10 out of the last 20 years) at the time of death. |
| Jurisdiction | UK‑established. | Non‑UK (HK or Guernsey). |
| Contribution Flexibility | Limited to pension allowances. | Must be a Non-UK LTR (10 out of the last 20 years) at the time of death. |
| Death Benefits | Taxable unless spouse exemption applies. | Paid free of UK IHT for qualifying residents. |
| Regulatory Environment | UK pension rules. | Strong international pension regulation (HK/Guernsey). |
| Use Case | Retirement income. | Retirement + estate planning + asset protection. |
5. Hong Kong and Guernsey QNUPS
Soteria Trust’s QNUPS offerings in Hong Kong and Guernsey align perfectly with HMRC’s requirements:
Hong Kong
- Non‑UK jurisdiction
- Strong regulatory environment
- No local tax on pension growth
Guernsey
- Long‑established pension governance
- Recognised by HMRC as a legitimate QNUPS jurisdiction
- Robust trust law and regulatory oversight
Both jurisdictions satisfy the requirement that the scheme be “established outside the UK”, which is essential for IHT exclusion for non‑long‑term UK residents.
6. UK Inheritance Tax Planning on Pensions with QNUPS
The 2027 reforms fundamentally change how pension wealth is treated on death. From April 2027, UK pensions will be subject to IHT at 40%. For expatriates who satisfy the non-UK LTR rules, a QNUPS offers one of the few remaining compliant, HMRC‑recognised structures that can keep pension wealth outside the UK IHT net.
In HMRC’s own words, non‑long‑term UK residents “will not be charged Inheritance Tax on pension schemes which are established outside the UK.”
For British expats in Asia, or Asian-based investors with UK assets, this is a decisive planning opportunity.
From 6 April 2027, most unused pension funds and pension death benefits will be included in a person’s estate for Inheritance Tax (IHT).
It is the total value of a member’s pension arrangements immediately before death, calculated under section 150A IHTA 1984. HMRC explains that a member is treated as “beneficially entitled” to this value at death.
The rules apply to UK-registered pension schemes, defined benefit and money purchase schemes, collective money purchase schemes, qualifying non‑UK pension schemes, and section 615(3) schemes.
Residency is crucial:
Long‑Term UK Residents: taxed on all pension schemes, wherever established
Non‑Long‑Term UK Residents: taxed only on UK‑established schemes
Non-Long-Term UK Residents will not be charged Inheritance Tax on pension schemes… established outside the UK.”
IHT on pension assets is due at the end of the sixth month after death. HMRC notes that after this point, interest will apply.
Before probate is issued, they may need to provide a copy of the will, death certificate, identity documents, and a signed declaration of authority.
A QNUPS (Qualifying Non‑UK Pension Scheme) is a pension scheme established outside the UK that meets HMRC’s qualifying criteria. While the HMRC technical note does not discuss QNUPS directly, it states that “non-long-term UK residents will not be charged Inheritance Tax on pension schemes… established outside the UK.” This rule determines how QNUPS are treated for IHT purposes.
QNUPS fall under the category of “qualifying non‑UK pension schemes,” which are included in the new framework. However, HMRC clarifies that IHT only applies to non‑UK schemes if the individual was a long‑term UK resident. The technical note states: “For long-term UK residents, Inheritance Tax arises… regardless of where the scheme is situated,” while “non-long-term UK residents will not be charged Inheritance Tax on pension schemes… established outside the UK.” This residency rule determines whether a QNUPS is within IHT scope.