The purpose of this page is to walk one fictional pension pot through every rule it will meet between 59 and 75: tax-free cash, the MPAA trap, state pension age, the April 2027 inheritance change, and the drawdown-or-annuity fork. Dates included.
Meera is fictional. She has consolidated her pensions into one £750,000 SIPP, has stopped full-time work, and wants roughly £30,000 a year to live on. Her question is not "am I rich"; it is "what happens, in what order".
Information and guidance only. Not personal advice. Meera is a fictional persona used to show how the rules interact. Verify decisions with a qualified FCA-authorised adviser before acting.
Retirement planning at 59 is mostly a sequencing problem. These are the dates the rules impose on Meera, before she makes a single choice of her own.
| Age / date | What happens | Status |
|---|---|---|
| 59 (now) | Already past the normal minimum pension age of 55, so the whole pot is accessible. The access age rises to 57 in 2028, which no longer affects her. | Enacted |
| First withdrawal | Up to 25% available tax-free, capped by the Lump Sum Allowance of £268,275. Her 25% is £187,500, well inside it. | Enacted |
| First flexible income payment | Triggers the Money Purchase Annual Allowance: future pension contributions capped at £10,000 a year. | Enacted |
| 6 April 2027 | Unused pension joins her estate for inheritance tax (Royal Assent 18 March 2026). | Enacted |
| 67 | State pension starts: £12,548 a year at the 2026/27 rate. Her net draw from the pot falls to £17,452 a year. | Enacted |
| 75 | Death after 75 means beneficiaries pay income tax on inherited pension money, on top of any IHT after April 2027. | Enacted |
25% of £750,000 is £187,500, inside the £268,275 Lump Sum Allowance. The rule says she can take it; the rule does not say taking it all at once is wise.
Taking the full lump sum at 59 moves £187,500 out of a tax-sheltered wrapper into her estate and taxable accounts, where interest above her Personal Savings Allowance (£500 a year for a higher-rate taxpayer) and gains above the £3,000 CGT exempt amount become taxable. Taking tax-free cash in slices alongside income (phased drawdown) keeps the rest sheltered for longer. After April 2027 the estate side of that trade-off changes again, because money left inside the pension is no longer outside IHT. There is a genuine tension between income-tax efficiency and inheritance-tax exposure, and the right slicing depends on her health, her heirs, and her other assets.
The Money Purchase Annual Allowance is the rule most often discovered too late.
The moment Meera takes any flexible taxable income from the pot (tax-free cash alone does not trigger it), her annual allowance for future pension contributions drops from £60,000 to £10,000, permanently, with no carry-forward of unused MPAA. If she is 59 and might return to consultancy work at 61, that sequencing matters: contribute first, draw later. This single rule is why "just dip into the pension" can quietly cost a later-career saver tens of thousands in lost contribution room.
From 6 April 2027, unused pension funds join the estate for inheritance tax. This is law (Royal Assent 18 March 2026), not a proposal.
Before April 2027 her SIPP sits outside her estate; after it, whatever remains is counted. If her total estate including the pension exceeds her available nil-rate bands (£325,000, plus £175,000 residence band where it applies, and anything transferable from a late spouse), the excess faces 40% IHT. Death after 75 adds a second layer: heirs also pay income tax at their own rate on inherited pension money, which is how combined effective rates above 67% arise on the same pound. For the full mechanics, worked households, and what the window before April 2027 allows, see the April 2027 explainer.
The last structural choice is how the pot becomes income. It is not all-or-nothing.
| Flexi-access drawdown | Lifetime annuity | |
|---|---|---|
| Income | Flexible, reviewable, can run out | Guaranteed for life, fixed at purchase |
| Investment risk | Stays with Meera | Transfers to the insurer |
| Inheritance | Remainder passes on (inside the estate from April 2027) | Usually nothing after guarantees end |
| MPAA | Triggered by first taxable income | A standard lifetime annuity purchase does not trigger it |
A common middle path secures essential spending (the gap between her target and the state pension) with an annuity bought in her late 60s, leaving the rest in drawdown. Annuity rates depend on gilt yields and health at the time of purchase, which is why this page shows the fork without pricing it.
Methodology. Figures from rules bundle UK-2026.1.1 (2026/27): Lump Sum Allowance £268,275, MPAA £10,000, annual allowance £60,000, state pension £12,548 (35 qualifying years, state pension age 67 for Meera), nil-rate band £325,000, residence band £175,000, IHT 40%, normal minimum pension age 55 rising to 57 in 2028, pensions into IHT from 6 April 2027 (enacted). Pot longevity modelled with start-of-year withdrawals in today's money at 2.5% real growth (£562,500 supporting £30,000 a year to 67 and £17,452 a year thereafter lasts about 44 years; at 0.5% real, about 29 years). All arithmetic machine-checked before publication. Published 7 August 2026 · figures last verified 7 August 2026.
Sonuswealth is pre-launch. The app builds this timeline from your actual pot, your state pension forecast, and your estate, and re-dates it when the rules move.