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Find out more'Will my self-invested personal pension incur inheritance tax?'
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I’m married and my will leaves everything to my spouse. I also have a self-invested personal pension (Sipp), which has an associated expression of wish for it be passed to one of my children as a pension.
Come 2027, I understand that the Sipp fund becomes part of my estate for inheritance tax (IHT) purposes.
Will this affect how much money my children will get?
Peter from Winchester
'£325,000 is the magic number'
Samm Galloway, Which? Money expert, says...
You’re right that the value of the money in your self-invested pension plan (Sipp), should you die on or after 6 April 2027, will be included when calculating the inheritance tax (IHT) due on your estate.
If the beneficiary was your spouse, inheritance tax (IHT) wouldn’t apply. But as the beneficiary is one of your children, then the money will be included when calculating the IHT due.
If the money in your Sipp is more than your tax-free allowances (such as the £325,000 nil-rate band), then IHT will apply at a rate of 40%.
If the beneficiary was your spouse, inheritance tax wouldn't apply
Although IHT is usually payable by the executors of the estate, the government has proposed that for Sipps the pension scheme administrator will become liable for reporting and paying it.
We expect legislation to confirm this later in the year.
Also note that your Sipp will still be administered separately from your will, because the Sipp is held within a trust wrapper.
The trustees will follow your wishes to pass to the nominated beneficiary, in this case your children.
- Find out more: inheritance tax is coming for pensions
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