I’m 72 and still haven’t drawn anything from my £1m pension. What should I do with it?

In our weekly series, readers can email any questions about their finances to be answered by our expert, Rosie Hooper. Rosie is a chartered financial planner at Quilter Cheviot and has worked in financial services for 25 years. If you have a question for her, email us at money@inews.co.uk. Question: I’m 72 and have a self-invested personal pension (Sipp) worth £1m – but I still haven’t touched it yet. I’m wondering what I should do with it? Answer: Firstly, congratulations. Reaching retirement with a £1m pension and seemingly no urgent need to draw on it puts you in a position many people would envy. The difficulty is that the answer to “what should I do with it?” has changed quite significantly due to upcoming pension changes. Shorts A few years ago, my answer to this question would probably have been quite straightforward as if you didn’t need the money and had other assets to draw on then leave the pension alone. But a major rule change is coming in April 2027 which means that advice is no longer as clear-cut. At the moment, pension pots can normally be passed on outside your estate for inheritance tax purposes, which is why many people have deliberately left their pensions untouched and spent other assets first. A pension has often been one of the most tax-efficient assets to leave to children or grandchildren. Next April, however, most unused pension funds will be brought into the inheritance tax net. That means a £1m pension that was once largely protected from inheritance tax could become part of the calculation when your estate is assessed and taxed at 40 per cent. That change is important for you as it could drastically alter your plans depending on your other wealth, who you want to benefit from your estate when you die and even their tax profile. Before making any decisions, I would want to know whether you have already crystallised any of the fund and whether you have taken your full tax-free cash entitlement. If you haven’t, there may still be planning opportunities available, although taking money out simply to beat the rule change is rarely sensible on its own. You should also think carefully about who is likely to inherit the pension. If it’s a spouse or civil partner who is the intended beneficiary, the position remains relatively favourable because transfers between spouses are generally exempt from inheritance tax. The position is potentially less attractive where the pension is ultimately destined for adult children. Following the 2027 changes, they could face inheritance tax as part of your estate and, if you die after age 75, there will also be income tax to pay when inherited pension funds are drawn at their marginal rate. That doesn’t automatically mean you should start emptying the pension. A pension remains a tax-efficient investment wrapper and you may need the money yourself for later life, care costs or unexpected expenses. However, for someone in your position, with a substantial pension pot and no apparent need to draw on it, this is exactly the moment to review your retirement and estate planning. It may now make sense to think about gradually drawing from the pension, making gifts during your lifetime, or using other inheritance tax mitigation strategies, rather than simply leaving the entire fund untouched. For many years a pension’s inheritance tax advantageousness meant that it was often best to leave your pension until last if you had a liability. The April 2027 changes make that strategy much less compelling, so now is the time to reconsider what role that £1m should play in your own future as well as your family’s.