What Happens to Your Pension at Age 75? The Critical Milestone for Drawdown Investors

For UK pension savers, age 75 is not just a birthday — it is a watershed moment that quietly reshapes how your pension works, how it is taxed, and what happens to it when you die. If you are using flexi-access drawdown to fund your retirement, the rules that apply at 75 can make a meaningful difference to the tax bill your beneficiaries eventually face.

Yet age 75 is rarely talked about until it is almost upon you. Many drawdown investors are surprised to learn that some of the most generous features of the UK pension system — like passing the entire pot to loved ones free of income tax — quietly fall away on this birthday.

Understanding what changes (and what stays the same) at 75 helps you plan early, structure withdrawals sensibly, and avoid leaving an unnecessarily large tax bill behind.

Why age 75 has special status in UK pensions

The UK pension regime treats age 75 as a key dividing line. Historically this was when "age 75 BCEs" (Benefit Crystallisation Events) were tested under the Lifetime Allowance. The Lifetime Allowance was abolished from 6 April 2024 and replaced with the Lump Sum Allowance (£268,275) and the Lump Sum and Death Benefit Allowance (£1,073,100). The age 75 BCEs were removed at the same time.

However, age 75 still matters for two main reasons that affect almost every drawdown investor:

1. The tax treatment of death benefits changes
2. You lose the ability to claim tax relief on personal pension contributions

Both can significantly affect your retirement strategy.

Death benefits before age 75: usually tax-free

If you die before age 75 with money still in your pension, your beneficiaries can typically receive the entire pot free of income tax — as either a lump sum or as ongoing beneficiary drawdown. This is one of the most generous features of UK pension rules.

There is still a cap to be aware of. Lump sum payments to beneficiaries are tested against the Lump Sum and Death Benefit Allowance (LSDBA) — currently £1,073,100 across all your pensions. Anything above that paid as a lump sum is taxed at the beneficiary's marginal rate. Money kept inside a beneficiary drawdown account is not tested in the same way.

For most savers with pots under £1m, this means dying before 75 leaves your loved ones with a tax-efficient inheritance.

It is also worth noting that under current rules, pensions sit outside your estate for inheritance tax (IHT) purposes. This is changing from April 2027, when most unused pension funds will be brought within the IHT net — a separate issue worth reviewing alongside the age 75 rules.

Death benefits after age 75: income tax applies

The picture changes meaningfully on your 75th birthday. After that, any death benefits paid out — whether as a lump sum or via ongoing beneficiary drawdown — are taxed as income at the beneficiary's marginal rate.

Practical example: Margaret at 78

Margaret dies at 78 with £400,000 left in her drawdown pot. She nominated her two adult children, Tom and Lisa, as beneficiaries. Tom is a higher-rate taxpayer earning £80,000. Lisa is a basic-rate taxpayer earning £30,000.

If they each inherit £200,000 as a lump sum in a single tax year:

• Tom would pay 40% income tax on most of it — and a £200,000 lump sum on top of his salary could push some of it into the additional rate band, costing roughly £80,000 in tax.
• Lisa would pay 20% on the portion within her basic-rate band, but the lump sum would push much of the rest into higher rate, costing around £74,000 in tax.

Combined, £400,000 could shrink to around £246,000 — a 38% tax cost, simply because Margaret died after 75 and the family took it as a lump sum.

This tax bill can be reduced. Beneficiaries who inherit a drawdown pot can usually leave it inside a beneficiary drawdown account and take income flexibly over many years. This spreads the tax across multiple tax years, often within their basic-rate band, and keeps the money invested for future growth.

You lose pension tax relief at 75

The other big change at 75 is that you can no longer claim tax relief on personal pension contributions.

Until 75, you can still pay into a pension and get tax relief on contributions up to the lower of your relevant UK earnings or £60,000 (the standard annual allowance for 2025/26). Carry forward rules can let you make significant catch-up contributions in the years before you stop work.

After your 75th birthday:

• Personal contributions get no tax relief
• The annual allowance no longer applies (you can still contribute, but with no tax benefit)
• Employer contributions are technically still permitted but very unusual at this age

If you are still earning into your 70s — even from self-employment or director's salary — making the most of pension contributions before 75 is one of the simplest and most powerful planning moves available.

What stays the same at 75

It is not all change. Several aspects of your pension carry on as before:

• You can still take income from drawdown at any rate you choose
• You can still take tax-free cash from any uncrystallised funds, subject to the £268,275 Lump Sum Allowance
• You can still buy an annuity at any age — rates typically improve with age
• You can still switch providers if you want lower fees, better investment options or improved service
• Investment growth remains tax-free inside the pension wrapper
• State Pension continues as normal and is unaffected by these rules

Planning steps to consider before age 75

The years leading up to 75 are when the smartest planning happens. You may want to consider whether any of the following apply:

1. Maximise contributions while you can. If you have unused annual allowance and earnings to support it, topping up your pension before 75 secures tax relief that disappears entirely at 75.
2. Review your beneficiary nominations. Make sure your provider has up-to-date "expression of wish" forms naming the right people. After 75 the tax stakes are higher, so getting the structure right matters more.
3. Consider partial annuitisation. Rates improve with age, and a partial annuity can lock in a guaranteed income that does not expose your loved ones to income tax on the underlying capital when you die.
4. Use ISAs alongside drawdown. ISA money is fully tax-paid, can be withdrawn at any age without further tax, and passes to a spouse via the Additional Permitted Subscription (APS) without using their own ISA allowance.
5. Talk to your beneficiaries. If your children are likely to inherit the pension, an early conversation about how to take it tax-efficiently — often by leaving it in beneficiary drawdown rather than taking a single lump sum — can save tens of thousands.
6. Stress-test the plan. Modelling what happens to your pot under different growth assumptions and life expectancies helps you spot weaknesses before they cost you.

A practical example: David at 73

David is 73, has £600,000 in flexi-access drawdown, takes £24,000 a year of taxable income, and supplements that with his State Pension and an ISA. He has two adult children and wants to pass on as much as possible.

• His pension tax relief stops at 75, so he tops up by £20,000 across the next two tax years using his self-employed earnings.
• He reviews his expression of wish nominations to confirm both children are listed equally.
• He shifts some of his drawdown investments into a slightly lower-volatility mix, since sequencing risk affects what is left for his beneficiaries as well as his own income.
• He briefs his children that, on his death, taking the pension as beneficiary drawdown rather than a lump sum will probably save them tens of thousands in income tax.

None of this requires drastic action — but the cumulative effect over the years that follow can be substantial.

Key takeaways

• Age 75 is a quiet but important milestone, especially for drawdown investors.
• Death benefits become taxable at the beneficiary's marginal income tax rate after 75, versus typically tax-free before.
• You lose the ability to claim tax relief on personal pension contributions at 75.
• Most other features — drawdown income, tax-free cash within the Lump Sum Allowance, switching providers — continue to work.
• Beneficiary drawdown is usually more tax-efficient than a lump sum payout after 75.
• Planning ahead in the run-up to 75 can preserve tens of thousands in tax for your family.
• The April 2027 IHT changes will add another layer to this picture, so a review nearer the time is sensible.

These rules can be complex, especially when blended with State Pension, ISAs, employer schemes and personal circumstances. It is worth speaking to a qualified financial adviser before making major changes — particularly if you are approaching 75 with a substantial pot and are weighing partial annuitisation or large withdrawals.

If you are trying to model how different drawdown strategies look across your remaining lifetime, our pension drawdown calculator and retirement planner are good places to start. And if you are reviewing whether your current drawdown provider is still the right fit as you approach 75, our provider comparison tool lets you compare fees, investment options and features side by side.