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Find out more'Can my self-invested personal pension be inherited tax-free?'
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Joanne has 20 years experience working in a bank and is a qualified mortgage adviser as well as financial adviser. She helps with pension, mortgage, tax and general banking/savings queries.
I have a self-invested personal pension (Sipp). If I die after April 2027 and I’m over 75, and if my nominated beneficiary dies before 75, will the sum their beneficiary inherits be subject to income tax?
Brian, Hertfordshire
'Inheritance tax on pensions is changing, but the income tax rules aren't'
Which? money expert Joanne Padilla says...
Your beneficiary would have to pay income tax on the Sipp; their beneficiary wouldn’t.
Pensions can only be inherited income tax-free if the holder dies before the age of 75. That won’t change in April 2027.
What will change is that, whatever your age when you die, your pension will be included as part of your estate, potentially leading to an inheritance tax bill (this wouldn’t apply to a spouse, but they’d still have to pay income tax).
Pensions can only be inherited income tax-free if the holder dies before the age of 75. That won’t change in April 2027.
Upon your death, one option for your beneficiary is to continue with a beneficiary drawdown pension.
Their beneficiaries would then be able to take the pension as a beneficiary drawdown, meaning that it’s possible for pensions to be passed down the generations. These plans can be transferred to other providers.
Whether income tax applies depends on the age of the last owner of the pension. This means withdrawals from an inherited fund can be taxed differently as the plan passes to new beneficiaries on successive deaths.
- Find out more: Six months until inheritance tax applies to pensions
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