Crystallise an untouched pension in one's 80s?

Peterrr

A relative in her mid 80s has never touched her DC pension. Nor does she ever intend to touch it, as she lives frugally within her state and widow's pension income, and also has other (GIA) investments that would cover any care costs should such arise.

Would a "benefit crystallisation event" have occurred automatically when she turned 75, thereby earmarking 25% of the pension's value at that time as being tax free?

She has advised her children that they are the named beneficiaries of her pension, and as as I understand it, they won't benefit from any income tax breaks on withdrawals from the inherited pension after her death. If the BCE at her 75th birthday didn't protect any part of the pension, might it be wise for her to crystallise it now to secure the 25% tax free portion? And if she does crystallise, presumably she would be obliged to actually withdraw that tax free lump sum despite the fact she doesn't need it (and probably never will)?

I appreciate the most tax effective solution might be for her to gift it to her offspring now, but that isn't something she wishes to commit to and I feel it isn't my place to suggest such!

I am also aware that from April 2027 her pension will fall into IHT territory, so the pension could suffer IHT and then income tax - aye-caramba!

Albermarle

She can not gift a pension whilst still alive.

Yes she should crystallise it now as the tax free cash benefit will be lost to any beneficiaries otherwise.
The cash will arrive in her bank account as part of the crystallisation process.

DRS1

Without knowing the value of the pension and the rest of her estate no-one can comment on the IHT position after 2027.  There may be nothing to worry about.
As she has survived past 75 there will be income tax to pay by her nominees when they take anything out of her pension after her death.  So as @Albermale says it would be a good idea for her to take the TFLS  herself and not leave it.  I have a niggle about taking it by age 75 but I am not sure why.  She would need to check with the scheme to make sure she can take a TFLS now - ie that nothing happened automatically under the scheme when she got to 75.
It would be as well to check she didn't have any other pensions which she may have taken in the past.

Peterrr

Thanks both. To clarify, my thought on her gifting was in regard to withdrawing then gifting, and accept that nobody can gift their pension while still alive. Much appreciated

DRS1

One thought you don't mention an ISA.  Many people take a TFLS out of their pension and put it in an ISA so that it stays in a tax free environment.  Maybe she could think about doing that.  Of course she could be moving things from her GIA into an ISA anyway and have no room for putting more away in an ISA at the moment.

Giving a lot of money away may be something she does not want to do and anyway at her age will she live another 7 years?  But she can give up to £3000 pa without worrying about the 7 years thing and that may be a level she feels more comfortable with.

Peterrr

Good point on the ISA DRS1, and something I can ask as a route into the conversation. Thanks again