You've inherited a pension. Now what?
Important information - the value of investments can go down as well as up so you may not get back what you invest. Eligibility to invest in a SIPP and tax treatment depends on personal circumstances and all tax rules may change in the future. You cannot normally access money in a SIPP until age 55 (57 from 2028). It’s important to understand that pension transfers are a complex area and may not be suitable for everyone.
Inheriting pensions
Pensions often get overlooked when people think about passing on their wealth - as they typically fall outside of an estate. Understanding pensions and what to do when you receive one can be tricky too. If you'd like to talk to someone about what to do with a pension left to you by a loved one, we're here to help. Call us on 0800 058 4443.
Here's what we'll cover
A pension is typically the second largest asset - after the family home - that many people own. The information in these pages relates to UK registered pension schemes - which often sit outside someone's estate. Please note that schemes from other jurisdictions may not be recognised by HMRC and be part of a taxable estate.
Usually, the scheme administrator will write to the beneficiary to let them know what their options are for withdrawing the money. Unlike other assets you can inherit, executors - or family and friends - aren't involved in the decision making.
The scheme administrator will review key information, including an expression of wish, to help decide who the pension is left to. Wills and the laws of intestacy (guidelines for if you pass away without a will) will also be taken into consideration if the key information they have isn't enough. Here are some things to think about if you've recently inherited a pension.
Pensions and tax
A pension typically sits outside of a person's estate for inheritance tax purposes. However, there may be some other taxes you need to consider, such as income tax. Anything left in the pension of the person who has died can be paid to the beneficiaries - whether that's as a lump sum or at regular intervals. In terms of tax rules:
- If the person died before they're 75 - this money is generally tax free.
- If the person died after the age of 75 - any money paid out will be subject to tax, based on the individual tax position of the beneficiary.
We always suggest seeking advice from a tax specialist as they'll be able to provide you with personalised tax advice.
What are your options?
What you want, or need, to do with it will depend on your age and whether you're actively building up your pension pot... or taking an income from it. Here are some options to consider, depending where you are on that journey.
Take financial advice
Prepare for drawdown
Choose investments
Opt for a guaranteed income
Combine your pensions
Withdraw the money
Important information: It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Before going ahead with a pension transfer, we strongly recommend that you undertake a full comparison of the benefits, charges and features offered. To find out what else you should consider before transferring, please read our transfer factsheet. If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly recommend that you seek advice from one of Fidelity’s advisers or an authorised financial adviser of your choice.
