Tax free growth on inherited pension

noneofthegearnoidea

After all the inheritance tax is paid etc, does the money on an inherited pension still grow tax free ?

Albermarle

Any money that remains in a pension pot will not be subject to Capital Gains or Dividend taxes, or tax on cash interest.

Currently there is no IHT liability on unused pension pots, but the legislation is due to change in 2027.
Even then there will only be IHT to pay if the whole estate of the deceased is large enough to incur IHT.

Aretnap

noneofthegearnoidea said:

After all the inheritance tax is paid etc, does the money on an inherited pension still grow tax free ?

What inheritance tax? Are you taking about an actual inherited pension or a hypothetical future one?

Currently there is no IHT to pay on an inherited pension. If the person whose pension it was died before the age of 75 there is no tax to pay at all, if they died after 75 then the beneficiary pays tax on money they withdraw as if it were income (so 0%, 20%, 40% or 45% depending on how much they withdraw, when they withdraw it and what other income they have). 

Either way growth within the pension remains tax free, so the usual advice is not to withdraw money sooner than you actually need it.

noneofthegearnoidea

Thank you both.