Inheriting a £750,000 pension — where the lump sum allowance starts to matter.

At £750,000 the lump sum and death benefit allowance (£1,073,100) starts to become a relevant consideration if the member has other pension pots or has already taken tax-free lump sums. If total death benefits across all schemes exceed the allowance, the excess is taxed at the beneficiary's marginal income tax rate regardless of the member's age at death — eliminating the before-75 tax-free advantage on the excess portion. For the portion within the allowance, the rules remain the same: tax-free before 75, taxable after. At this pot size, the income tax bill after 75 for a higher-rate taxpayer is £300,000 — three-quarters of the value of an average UK house. Phased drawdown for the beneficiary is essential: spreading £750,000 of taxable income over 10+ years can keep the effective rate well below 40%. Professional financial advice is strongly recommended at this level.