HMRC is ending tax relief for state pensioners who turn 75, under rules enforced by the Labour government's tax arm. Once you reach 75, you no longer receive tax relief on personal pension contributions. Consequently, many pension schemes no longer accept new contributions after this age.
Exceptions for Working Pensioners
If you are still working at 75, your employer can continue paying into your pension, provided these contributions comply with tax rules.
Impact on Death Benefits
Fidelity explains that age 75 is also a critical threshold for death benefits. If someone dies before 75, their beneficiaries currently do not generally have to pay income tax or inheritance tax (IHT) on inherited pension wealth. However, if death occurs at 75 or over, beneficiaries typically pay income tax on money received from the pension, though they usually do not pay IHT on it.
From 6 April 2027, unused pension funds and certain death benefits will be included in the deceased's estate for IHT purposes.
Tax-Free Cash After 75
After turning 75, you should still be able to take your pension’s tax-free cash, but the rules become more complicated and potentially less favourable. Some pension providers may not allow tax-free cash withdrawals after 75.
Private Pension Contribution Limits
Private pension contributions are tax-free up to certain limits. This applies to most private pension schemes, including workplace pensions, personal pensions, stakeholder pensions, and qualifying overseas pension schemes. You usually pay tax if your pension savings exceed either 100% of your annual earnings (the limit on tax relief) or £60,000 per year (the annual allowance). Additionally, tax is payable if your pension provider is not registered for tax relief with HMRC or does not invest your pension pot according to HMRC's rules.
