Is leaving your personal pension untouched still the right plan

You expect the NHS pension to meet much of your retirement spending. The separate personal pension has a different job: leave it invested, draw on other assets first and eventually pass it to the children.

That plan deserves another look if its main justification was keeping the pension outside inheritance tax. From April 2027, the tax treatment changes. The practical response is to reconsider what the money should support, including during your lifetime, before deciding whether anything should be withdrawn.

For a consultant approaching a change in working life, the personal pension might help fund fewer clinics, time with a partner or support for adult children. It may also remain an important reserve for later years. Those uses deserve comparison alongside the inheritance position.

What changes in April 2027

For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will be included in the estate for inheritance tax purposes. HMRC’s technical note confirms that the change is legislated in Finance Act 2026.

Inclusion does not mean every pension attracts an inheritance tax bill. Allowances, exemptions, residence and the recipient matter. Spouse and civil partner exemptions remain relevant, subject to the conditions, and there are exclusions including qualifying death-in-service benefits and dependants’ scheme pensions.

This concerns treatment on death. There is no requirement to empty the pension before April 2027. The old order of spending needs reviewing against the family’s circumstances.

First establish what the NHS pension will cover

Use pension estimates showing the income available after tax and the dates from which it could begin. Benefits expected at retirement are different from money available to support reduced work now. Include the partner’s income, pensions and the position if either of you died.

Set that against regular spending, occasional larger costs and reserves for uncertainty. If the NHS income covers the essentials, the personal pension may offer more choice over timing and purpose. Its value, access conditions and investment risks still matter.

Keep company assets separate from personally available capital. An investment portfolio inside the practice company is not interchangeable with cash you can draw from a personal account.

Compare three uses of the same money

One option is to leave the pension invested for later-life spending and whatever can eventually pass to beneficiaries. Another is to draw planned amounts, once access is available, to support a gradual reduction in work. A third is to use some of it for family support while retaining enough for your own needs.

Make each option specific. Giving up a private clinic becomes a revised timetable and a household income gap after costs and tax. Travel becomes a budget and intended dates. Helping a child becomes a defined amount, with a discussion about timing and fairness between siblings.

Include your partner’s preferences. One of you may want a larger reserve while the other values more shared time now. You may both want to help the children but disagree about how much can be committed without limiting your own plans.

Compare the options with using accessible savings first or continuing the existing working pattern. For each, show what changes now, what remains for later and which assumptions could alter the answer. Weaker investment returns, a longer life or additional caring costs should have a place in that comparison.

A withdrawal is not automatically an improvement

Pension income is generally taxable, with the rate depending on total income in the tax year. A large withdrawal alongside NHS pay, private income or other pensions can be expensive. Money withdrawn and left in a bank account can still form part of the estate.

Check tax-free cash across all schemes too. The lump sum allowance is shared across pensions, so an NHS lump sum can affect what remains available from the personal pension. Previous benefits and protections need individual assessment.

If pension contributions will continue, the method of withdrawal matters. Certain flexible withdrawals trigger the money purchase annual allowance, restricting future defined contribution saving before a tax charge arises. Taking pension commencement tax-free cash alone does not normally trigger it. Confirm the proposed method before the first payment.

Gifting the proceeds also needs a separate check. An exemption may apply, while other outright gifts can remain relevant for inheritance tax for seven years. The lifetime gifting rules do not make a pension withdrawal tax-free or establish that the gift is affordable.

Give the pension an agreed purpose

Ask the planner to compare leaving the pension invested, drawing planned amounts and using other assets first. The comparison should show spendable income through the transition out of work, provision for a surviving partner and later-life needs, and what beneficiaries might receive after relevant taxes.

Check access terms, investment approach, charges and beneficiary nominations alongside the figures. Then ask each partner to identify the use they most value and the reserve they would be uncomfortable going below.

Leaving the pension untouched may remain the right plan. It should follow from what the family wants and can afford, with the revised tax treatment understood. The money can then have a clear purpose, whether that is greater freedom now, security later or support for the next generation.

This article provides general information, not individual pension, investment or tax advice. The personal pension discussed is a defined contribution arrangement alongside NHS benefits. Access and tax treatment depend on your circumstances. Rules were checked on 26 October 2026.

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