Executor Liability — The Hidden Risk in Finance Act 2026 Most Advisers Haven’t Flagged Yet

Most of the coverage of Finance Act 2026 has focused on the headline numbers — 67% combined effective tax rate, £165,000 net on a £500,000 pension. These figures are striking and important. But there is a second consequence of the legislation that has received far less attention, and which in many client situations may be just as pressing: executor personal liability.

The new executor obligation

Under the April 2027 rules, when a member dies with a DC pension fund, the pension IHT charge becomes payable to HMRC within 6 months of the date of death. This is a hard statutory deadline — HMRC will charge interest after that point, and the executor is personally responsible for ensuring the payment is made on time.

This obligation cannot be deferred until the estate is distributed. The executor cannot wait for the pension administrator to release funds, nor can they wait for probate to be granted. In many estates — particularly those that are illiquid, contested, or involve property that takes time to sell — this creates a situation where the executor faces a large personal liability before they have received anything from the estate themselves.

A concrete example

Margaret, 77, dies in June 2027. Her estate consists of a home worth £450,000 (passing to her two children), personal assets of £80,000, and a £600,000 SIPP. Her eldest daughter Claire is the executor.

Claire will eventually receive her share of the estate — but that process takes months, often longer if probate is contested or the property sale is slow. In the meantime, she must either find £260,000 from her own resources, or negotiate with HMRC, or attempt to access the estate assets early — none of which are straightforward.

Where this becomes particularly acute

The executor liability problem is most severe in three situations that are increasingly common:

• Blended families: Where a child from a prior relationship is executor but a new partner has an interest in the estate. The child may face a large IHT liability while the estate is disputed or frozen pending resolution of competing claims.
• Illiquid estates: Where the main estate asset is property. The 6-month HMRC deadline may arrive before the property sale completes.
• Large pension funds: Where the pension IHT liability is significantly larger than the liquid assets available. A £1m pension generates a £400,000 IHT liability — which must be paid before most estates have that level of liquid assets available.

The Consumer Duty obligation

Advisers have a clear obligation under the FCA’s Consumer Duty to explain material risks that clients would reasonably want to know about. The executor personal liability provision of Finance Act 2026 is unambiguously material for any client who:

• Has a DC pension balance above £100,000
• Has named a child, sibling, or other non-spouse as executor
• Intends the pension to pass to non-spouse beneficiaries

Not flagging this risk in the context of Finance Act 2026 planning is a compliance exposure. The review process triggered by this legislation should explicitly cover executor liability in the adviser’s file documentation.

How the Flexible Pension Annuity eliminates this

When a client transfers their pension fund into the Flexible Pension Annuity, the residual value on death passes via a Preference Share — not as a pension death benefit. The Preference Share is a personal estate asset that passes through the will like any other asset.

The consequences of this are significant:

• There is no separate HMRC pension IHT reporting process — no form, no deadline, no special procedure
• There is no 6-month executor personal liability for pension IHT — because the pension IHT charge does not arise
• The IHT position is managed as part of the standard probate and estate administration process, with the BPR claim (after the 2-year qualifying period) made in the normal way
• The executor’s role is straightforwardly simplified — no pension scheme trustees to deal with, no separate HMRC reporting obligation, no personal liability exposure

What advisers should do

Review your client bank now for any client who has named a child or non-spouse as executor and holds a DC pension balance above £100,000. For these clients, the executor liability conversation should be on the agenda at the next review — before April 2027, while there is still time to act.

The planning is straightforward. A transfer into the Flexible Pension Annuity eliminates the income tax charge on death from day one, and starts the 2-year BPR clock simultaneously. By the time Finance Act 2026 takes effect in April 2027, many clients who act now will already be past or approaching the 2-year qualifying period — eliminating both taxes and the executor liability simultaneously.