Pensions and planning for age 75
This article first appeared in Professional Paraplanner in February 2026.
Since the lifetime allowance for pensions was abolished, reaching the age of 75 no longer triggers a potential tax charge that it once did for pension savers. In the past, turning 75 could have meant facing complex rules regarding how much you could hold in your pension without incurring additional tax charges.
While these particular rules have now been removed, it’s important to recognise that an individual’s 75th birthday still carries considerable importance when it comes to pension planning and managing retirement savings. There remain several key considerations and potential actions that individuals should take as they approach this milestone age. This article will explain why age 75 continues to matter in the world of pensions and highlight the main reasons why careful planning around this date is still recommended.
Tax relief on pensions stops
Tax relief on individual pension contributions stops at age 75. So, if your client is still funding pensions this needs to be considered. In theory contributions can continue without tax relief but most providers won’t allow these. Also, it’s possible for employer contributions to continue beyond age 75 if your client is still working, again subject to the provider allowing this.
The taxation of death benefits from defined contribution schemes
On death before age 75 any income taken by a beneficiary is income tax free whether this is via annuity purchase or income drawdown. Any lump sums will be income tax free up to the available lump sum and death benefits allowance. This means most benefits taken on death before age 75 will be income tax free during the lifetime of the beneficiary.
On death after age 75, any income or lump sums taken by a beneficiary will be taxed at their marginal rate of income tax. The lump sum and death benefit allowance ceases to be relevant after age 75 as no benefits are available tax free.
This might mean on approaching age 75, the client wants to change the beneficiaries due to their taxation status, and a new expression of wishes form is required. For example, a change from children to grandchildren.
From 6 April 2027, inheritance tax could apply to unused pension funds and death benefits on death before or after age 75 depending on who they are payable to and what exemptions or nil rate bands are available.
Tax free lump sums from pensions
Due to the difference in the taxation of death benefits before and after age 75, any tax free cash entitlement still available post age 75 is worth discussing. This is because the right to this tax free cash will die with the client on death after age 75. In other words, this entitlement does not pass to the beneficiary as all benefits will be subject to income tax.
Due to inheritance tax applying to unused pension funds and death benefits from 6 April 2027 this might raise the appeal of taking any tax free cash before age 75. This could avoid both inheritance tax and income tax applying to it assuming the cash is spent or gifted using exemptions.
Trusts set up during lifetime to receive lump sum death benefits from pensions
On death before age 75, any lump sum death benefits payable to a trust will pass without the deduction of any income tax subject to the available lump sum and death benefit allowance.
On death after age 75, the provider will deduct a tax charge of 45% before paying the benefits to the trust. This is called the special lump sum death benefits charge.
Whilst this tax charge is available as a tax credit when a beneficiary ultimately receives benefits from the trust, reviewing any trusts set up to receive death benefits is worthwhile on the run up to age 75. The trust can easily be set aside by completing a new expression of wish form in favour of individual beneficiaries.
Turning age 75 is an important milestone and one which can require careful planning to make the most of the options available and avoid unnecessary tax charges. Involving beneficiaries in the planning process and keeping expression of wish forms up to date can be vital.
