Passing your pension to the next generation

Your pension isn’t just a retirement savings pot, it’s an effective tool to help support future generations. In addition to ensuring your financial certainty when you finish working, defined contribution pensions are a tax-efficient way of passing on your wealth. 

Pensions can sit outside your estate for IHT purposes, so the money within your defined contribution pension can be passed onto your loved ones without incurring any IHT. 

Alleviate some financial pressures 

With financial pressures mounting for many people, you might consider a tax-efficient gift of a pension worth passing on to your children perhaps. Your loved ones will usually inherit the pension itself rather than the money inside it, meaning they can continue to benefit from the tax advantages, including tax-free investment growth. 

As another option, you may wish to consider starting a pension plan, within limits, for a child, rather than (or in addition to) leaving them yours. Looking further ahead your children might even pass the pension onto their children, still without paying a penny of IHT if current rules still apply. 

Passing a pension on might not be the right choice for everyone, there’s plenty to consider. 

It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.