Inheriting a £100,000 pension — the age-75 boundary in sharp focus.
What tax applies when inheriting a £100,000 pension? Understand the age-75 rule, IHT exemption, and how much your beneficiary keeps.
At £100,000 the age-75 boundary creates a stark difference. Death before 75 means the full £100,000 passes tax-free to nominated beneficiaries. Death at 75 or later means the beneficiary pays income tax on every pound withdrawn — £20,000 at basic rate, £40,000 at higher rate, or £45,000 at additional rate. This makes the pension one of the most IHT-efficient assets available: DC pensions sit outside the estate for inheritance tax purposes because scheme trustees have discretion over who receives them. At £100,000, many people use their pension as a 'last resort' fund — spending ISAs, cash, and other assets first in retirement to preserve the pension for tax-free inheritance. This strategy works best when the member expects to die before 75, but even after 75 the IHT exemption makes pensions more efficient than most other assets for passing wealth.