I live outside the UK, will my beneficiaries pay UK inheritance tax on my pension?

Related news

• 14 September 2026

  UK retailers battle for consumer wallets against a tricky backdrop

  7 min read

  Author

  Shares magazine

• 10 September 2026

  Sold-out chips, soaring profits: what next for Micron?

  3 min read

  Author

  Shares magazine

• 10 September 2026

  What the TTFAC? The pension acronym that can cause tax-free cash confusion

  5 min read

  Author

  Shares magazine

View more

Shares Magazine

10 September 2026

Download the latest edition Read page flip version

Rachel Vahey, AJ Bell Head of Public Policy, says:

First, the UK-Singapore tax treaty deals with income tax, and your NT code is concerned with the tax treatment of your pension withdrawals while you’re alive.

However, inheritance tax (IHT) is a different tax, and the fact that you can receive your pension without it being subject to UK income tax does not mean the pension will be outside IHT when you die.

The rules for IHT and pension funds are changing. From 6 April 2027, unused pension funds will be included in someone’s estate when working out if IHT is due. Unused pensions are usually any pension funds you have not yet accessed, or unused drawdown funds.

Generally, a non-UK resident may be able to take their worldwide assets outside the UK for inheritance tax purposes. But, since April 2025, there is a new residency-based scheme which affects non-UK domiciled individuals when determining whether IHT is due. The test is now whether a person has been resident in the UK for 10 years prior to the tax year in which the death (the chargeable event) happened, as well as keeping a person in scope for up to 10 years after leaving the UK (depending on how long you had lived in the UK).

A UK registered pension will face IHT under the new rules

However, a UK registered pension – whether it’s your SIPP or your workplace pension – is a UK-situated asset. So, it will stay within UK IHT regardless of where you live or how long you have been away. Furthermore, even though your beneficiaries are resident outside the UK they still have to pay UK IHT on all UK-situated assets.

Generally, IHT is due at a rate of 40% on money in the estate above the nil-rate bands; that includes the standard nil rate band of £325,000 plus the residence nil-rate band of £175,000 which applies if a residential property is passed to a direct descendant. For estates worth more than £2 million the residence nil rate band is gradually tapered away, until it disappears if the estate is valued at or above £2.35 million. The IHT due is proportioned between each pension scheme and any other UK-situated assets.

It’s important to note, that if the beneficiary is a UK-resident spouse or civil partner they would be treated as an excluded beneficiary and unlimited wealth can be passed to them tax free. However, if the spouse is not a long-term UK resident, that tax-free limit drops to the standard nil-rate band of £325,000. The spouse could possibly elect to be treated as a long-term UK resident to unlock unlimited exemptions, but this brings their worldwide assets into the UK tax net, though tax advice should be sought to ensure they comply with the rules surrounding this.

Drawdown pension benefits can generally be paid to beneficiaries as a lump sum or as beneficiary’s drawdown. However, many pension schemes restrict new arrangements for non-residents due to compliance and banking restrictions, and it’s likely that your beneficiaries will only have the option of a lump sum payment. Unless your beneficiary already has a SIPP with AJ Bell, we wouldn’t set up a new one for a Singapore resident. You may want to check the situation with your workplace pension provider.

IHT is not the only tax to think about

However, IHT is not the only UK tax that may apply to your UK pensions on your death. If you die under the age of 75, then your beneficiaries won’t have to pay any income tax on their lump sum payment. But if you die aged 75 or over then their withdrawals could be subject to UK income tax.

Like you, they may be able to apply for the NT code as under UK-Singapore tax treaty the lump sum is likely to only be taxable in the country of residence.

This is a complex area, so it would be sensible to seek advice from a specialist overseas tax adviser dealing with the UK/Singapore double taxation agreement and UK/Singapore taxes to understand all the potential implications for your family.