What Happens to Your Pension When You Die? UK Rules Explained

Published 10 March 2026 • 8 min read

What happens to your pension after you die depends on the type of pension, your age at death, and who you have nominated as a beneficiary. In many cases, pensions offer one of the most tax-efficient ways to pass on wealth — potentially completely tax-free. Here are the rules.

Key point: Pensions generally sit outside your estate for inheritance tax (IHT) purposes. This means your pension pot is not included in the £325,000 IHT threshold — making pensions a powerful estate planning tool.

Defined Contribution Pensions (Most Workplace and Personal Pensions)

The rules for defined contribution (DC) pensions are straightforward and depend primarily on your age at death:

Death Before Age 75

Your entire remaining pension pot can be passed to your nominated beneficiaries completely tax-free
Beneficiaries can take it as a lump sum, transfer it to their own drawdown, or buy an annuity
The claim must typically be made within two years of the pension provider being notified of the death

Death at Age 75 or Over

Beneficiaries can inherit the pension pot but will pay income tax at their marginal rate on any withdrawals
They can still take it as a lump sum, enter drawdown, or buy an annuity
Smart beneficiaries spread withdrawals over multiple tax years to minimise the tax bill

Important change ahead: From April 2027, the government has proposed that unused pension pots will be included in the estate for inheritance tax purposes. This is a significant change — take advice now if this affects your planning.

Defined Benefit (Final Salary) Pensions

Defined benefit pensions work differently. On your death:

Spouse’s pension: Most schemes pay a surviving spouse or civil partner 50% of your pension income for their lifetime
Children’s pension: Some schemes pay a pension to dependent children until they reach a certain age (usually 18 or 23 if in education)
Lump sum death benefit: If you die before retirement, many schemes pay a lump sum (often 2–4 times your salary)
Guarantee period: If you die within a guarantee period (typically 5–10 years of starting your pension), the remaining guaranteed payments go to your estate or beneficiaries

The exact benefits depend on your scheme rules — check your scheme booklet or ask the pension administrator.

The State Pension

The State Pension does not pass on in the same way as private pensions:

You cannot leave your State Pension to anyone in your will
A surviving spouse may inherit some additional State Pension or protected payments, depending on when you reached State Pension age
Under the new State Pension (post-April 2016), there is limited scope for inheritance — only a “protected payment” above the full rate may be inherited

Why Nomination Forms Matter

Unlike most assets, pensions do not automatically follow your will. Instead, the pension provider uses a nomination form (also called an expression of wish) to decide who receives your pension.

Complete a nomination form with each pension provider
You can nominate anyone — spouse, children, siblings, friends, or even a charity
Update your nominations after major life events (marriage, divorce, children, bereavement)
The provider has discretion but will usually follow your wishes
Without a nomination, the provider decides — and they may not choose the person you would have wanted

Pensions as an Estate Planning Tool

Because pensions normally sit outside your estate for IHT, they can be a powerful planning tool:

Spend other assets first: Drawing down ISAs, savings, and other investments before touching your pension preserves the IHT advantage
Pass down generations: Beneficiaries can keep inherited DC pension in drawdown and pass it on again when they die
Consider who inherits: Nominating someone in a lower tax bracket means less tax on withdrawals after age 75

Want to make sure your pension goes to the right people? An FCA-regulated adviser can help structure your pensions for maximum tax efficiency on death and ensure your nomination forms are up to date. Get matched for free →

Key Takeaways

DC pension pots are tax-free to beneficiaries if you die before 75
After 75, beneficiaries pay income tax on withdrawals at their marginal rate
DB pensions typically provide 50% spouse’s pension for life
Pensions generally sit outside your estate for IHT (though this may change from April 2027)
Always keep your pension nomination forms up to date — pensions do not follow your will