Should I transfer my old pension so my beneficiaries pay less tax?

14 Oct, 2026

Question by Dave

I have a pension of which I have not started to take yet and at 65 I am now considering doing so.

It is a former workplace defined contribution scheme and will only pay a lump sum to my beneficiary should something happen.

Would this be a consideration for moving the pension to a scheme that offers more flexibility for beneficiaries in relation to potential income tax issues.

I look forward to your reply.

Kind regards.

Answered by Toby Barklem

The fact that the pension will only pay a lump sum to your beneficiary could have serious negative tax consequences. That lump sum will possibly pay the highest rate of tax. If the pension is large enough to be taken over several years for income, a more modern pension with beneficiary A method of accessing your pension which involves taking out money in instalments when you want to. will likely save quite a lot of tax.

Apart from that, workplace pensions generally have low service levels, poor drawdown ability for you during your life and limited investment choice. They are often (although not always) cheap though. So it is something to consider carefully whether to transfer.

Answered by

Toby Barklem

Principal and Chartered Financial Planner

I’m a natural planner – planned in the army, planned in my corporate career, now I help people plan their financial lives. A financial planner can bring benefits on several fronts – sometimes its picking the right investment and sometimes it’s deploying some technical or numerical skills. But often it’s as simple as listening to you and drawing out what you really want from a complicated personal picture. I hope I bring a depth of life experience to guide you through that process.

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