For decades, pensions have been the backbone of retirement planning. Safe, tax-friendly and reliable, they even offered a neat inheritance perk: money left untouched could often pass to the next generation without much interference from the taxman. The latest Budget has changed that picture.

From April 2027, any unused pension will be treated as part of your estate for inheritance tax. If you die after age 75, things get even tougher: beneficiaries may face inheritance tax at 40% and then income tax when they draw the money out. In some cases, over half of a pension pot could end up with HMRC.

That has prompted many to ask whether leaving everything inside a pension still makes sense. For some, the smarter option may be to take money out earlier and put it into other tax-efficient investments. This is where the government’s Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) can come into play.

These schemes were designed to support young UK companies, and in return, they offer investors generous tax breaks. With SEIS, you can invest up to £200,000 a year and claim 50% income tax relief. You can also carry back unused allowance from the previous year, which means you could invest up to £400,000 in one go and receive as much as £200,000 in relief. EIS works on a larger scale, offering 30% income tax relief on up to £2 million annually.

Both schemes can also bring significant inheritance tax benefits. After you have held qualifying shares for two years, they usually fall outside your estate through Business Relief. Up to £1 million can receive 100% relief, while anything above that still enjoys 50% relief. The difference is striking compared to a pension pot that might face two layers of tax after death.

Here is how it might work in practice.

Suppose you withdraw £100,000 from your pension in a year where you have no other income. Once your personal allowance and tax bands are applied, you would face an income tax bill of around £27,423. Instead of simply paying that, you reinvest part of the withdrawal into SEIS and part into EIS.

• £40,000 goes into SEIS, generating £20,000 of relief.
  
• £25,000 goes into EIS, generating £7,500 of relief.

Together, that is £27,500, enough to cover the tax bill almost to the penny.

Now assume the investments perform as intended, delivering 2-3x growth over 5-7 years. Your £65,000 investment could grow to between £130,000 and £195,000, and any gains are tax-free should you hold the investment for the minimum 3-year period. 

Of course, SEIS and EIS are not risk-free. These are early-stage companies, and some will fail, while the investments are illiquid. However, pensions are already long-term vehicles, and many investors are comfortable with a similar horizon. The government has built layers of protection: income tax relief, loss relief and capital gains exemptions all help reduce risk. For many, the potential rewards and inheritance tax advantages make the balance worthwhile.

And this is not just about tax. By investing through SEIS and EIS, you are backing ambitious British businesses at the start of their growth journeys. Many investors like the idea that their children will inherit financial value and a legacy of positive, future-focused investing.

The final piece is choosing the right manager. At Haatch, we have built a strong track record of backing businesses with real traction, delivering 4 exits in 2025 alone. Our average deployment time across SEIS and EIS is just 3.6 months, so investors do not wait long for their money to be at work and for the two-year IHT clock to start ticking. And we’re fully backed by the government-owned British Business Bank, providing our investors with institutional validation to provide confidence in the quality of our investment decisions.

Pensions will always remain the foundation of retirement planning. But with the rules shifting, it makes sense to consider how to complement them. Combining pensions with SEIS and EIS can reduce tax, protect your estate and create a legacy that blends financial value with real-world impact. It is a rare example of tax efficiency aligning with opportunity, and right now it looks like a smart move.

Written by Olivia Drinnan