Inheriting a £150,000 pension — where planning really pays off.
How much of a £150,000 pension does the beneficiary actually receive? See the tax impact of the age-75 rule and compare scenarios.
A £150,000 pension inheritance starts to show why estate planning around the age-75 boundary matters so much. Before 75, the full £150,000 passes tax-free. After 75, a basic-rate taxpayer beneficiary loses £30,000 to income tax; a higher-rate taxpayer loses £60,000. The difference between dying at 74 and 76 could cost your family £30,000-£60,000 in tax. At this pot size, the spending-order strategy becomes compelling: draw from ISAs and taxable accounts first, preserve the pension, and aim to pass it on before 75 if health allows. Even after 75, the pension remains outside the estate for IHT — so a £150,000 pension inherited and taxed at 20% (net £120,000) is still better than £150,000 in a general investment account taxed at 40% IHT (net £90,000). The pension wins on both sides of the age-75 line.