What Happens to Your Pension When You Die UK?

Your pension could be worth more than your house. Yet most people have no idea what happens to it when they die - or who would receive it.

Unlike your home or savings, your pension doesn't automatically go to your spouse. And it may not be covered by your will either.

The rules are complicated, vary by pension type, and depend on a form most people have never updated: your beneficiary nomination.

How Pension Death Benefits Work
Defined Contribution Pensions
Defined Benefit Pensions
State Pension
Tax on Inherited Pensions
Beneficiary Nominations
FAQ

How Pension Death Benefits Work {#how-it-works}

When you die, what happens to your pension depends on:

Type of pension - Defined contribution, defined benefit, or state pension
Your age at death - Under 75 or over 75
Whether you'd started taking it - "Crystallised" or "uncrystallised"
Your beneficiary nomination - Who you've named to receive it
The scheme rules - Each pension has different rules

The Key Document: Beneficiary Nomination

For most pensions, you can nominate who should receive death benefits. This is called an "expression of wishes" or "beneficiary nomination."

Critical point: This nomination often operates outside your will. Even if your will says "everything to my spouse," your pension could go to an ex-partner if they're still named as beneficiary.

Pension trustees have discretion, but they usually follow your nomination unless there's a good reason not to.

Defined Contribution Pensions {#defined-contribution}

This is the most common type for people under 50. Your contributions (and your employer's) build up a pot that's invested.

Includes:

Workplace pensions (auto-enrolment)
Personal pensions
SIPPs (Self-Invested Personal Pensions)
Stakeholder pensions

If You Die Before 75

Your beneficiaries can receive the entire pot tax-free (no income tax, no inheritance tax).

They can take it as:

A tax-free lump sum
Tax-free income (pension drawdown)
Purchase a tax-free annuity

This is one of the most generous inheritance tax exemptions available.

If You Die After 75

Your beneficiaries can still receive the pot, but:

Withdrawals are taxed as income at their marginal rate
Lump sum = potentially 40%+ tax
Drawdown = taxed as income (could be 0% if they're low earners)

If You'd Already Started Taking Your Pension

The remaining pot can still pass to beneficiaries under the same rules (tax-free if under 75, taxed as income if over 75).

If you'd bought an annuity, it depends on the annuity type:

Single life annuity - Payments stop when you die
Joint life annuity - Continues paying to your spouse
Guaranteed period - Pays for a minimum period regardless

Defined Benefit Pensions {#defined-benefit}

Also called "final salary" or "career average" pensions. These promise a specific income in retirement based on your salary and years of service.

They're becoming rare in the private sector but common in public sector jobs (teachers, NHS, civil servants, police).

Death Before Retirement

Most schemes pay:

Lump sum death benefit - Often 2-4x your salary, tax-free
Spouse's pension - Often 50% of what you would have received

The lump sum is usually paid at the trustees' discretion (following your nomination), so it's typically outside your estate for IHT.

Death After Retirement

Your pension stops - No more payments to you
Spouse's pension begins - Usually 50% of your pension
Some schemes offer children's pensions too

Important: "Spouse" usually means legal spouse or civil partner. Unmarried partners may not automatically qualify - check your scheme rules and update nominations.

Can You Leave It to Anyone?

Defined benefit schemes are more restrictive. The lump sum can usually go to anyone you nominate, but the ongoing pension typically only goes to a spouse, civil partner, or sometimes dependants.

State Pension {#state-pension}

The State Pension works differently. You cannot directly inherit someone else's State Pension.

However, there are some benefits for surviving spouses:

If Your Spouse Dies

New State Pension (from April 2016):

You may inherit some of their "protected payment" (additional amount above the full rate)
You cannot inherit the basic amount

Old State Pension (before April 2016):

More complex rules apply
May inherit additional State Pension or SERPS

Bereavement Benefits

If your spouse or civil partner dies, you may be entitled to:

Bereavement Support Payment - Lump sum (£3,500) plus monthly payments (£350) for up to 18 months
Must claim within 3 months of death for full amount

Unmarried partners don't qualify for bereavement benefits based on State Pension.

Tax on Inherited Pensions {#tax}

Death Before 75

What Beneficiary Receives	Tax Treatment
Lump sum	Tax-free
Drawdown income	Tax-free
Annuity	Tax-free

Death After 75

What Beneficiary Receives	Tax Treatment
Lump sum	Taxed as income (at their marginal rate)
Drawdown income	Taxed as income
Annuity	Taxed as income

Strategic Implications

If you're approaching 75 and have other assets, consider:

Using pension last (it's IHT-free and can pass tax-free before 75)
Using other assets first for income
Planning around the age 75 threshold

Beneficiary Nominations: The Form That Matters Most {#nominations}

Why It Matters

Your beneficiary nomination tells the pension trustees who should receive your death benefits. It's:

Usually binding (trustees follow it in most cases)
Often outside your will
Valid even if your circumstances change

Common Problems

Outdated nominations:

Ex-spouse still named after divorce
Parents named when you were young, never updated after marriage
First child named, subsequent children not added

No nomination at all:

Trustees have discretion
May go to legal next of kin
Could be contested

How to Update

Log into your pension provider's website, or
Contact them and request a beneficiary nomination form
Complete and return the form
Keep a copy for your records

Do this for:

Workplace pension
Any old workplace pensions from previous jobs
Personal pensions and SIPPs
Death-in-service benefits (separate from pension)

Who Should You Nominate?

Consider:

Your spouse/partner
Your children (if adults)
A trust (for minor children or complex situations)
Multiple beneficiaries with percentages

Note: You can update your nomination at any time. Review it when:

You get married or divorced
You have children
Your relationship status changes
Every few years as a matter of course

Pensions and Your Will

The Confusion

Many people assume their will covers their pension. It usually doesn't.

Pension death benefits are typically paid at the discretion of scheme trustees. Your will doesn't control them.

What Your Will CAN Do

Specify what should happen to pension funds once received by beneficiaries
Create trusts for minor children
Provide guidance (though not binding on trustees)

What Your Nomination Does

Tells trustees who you want to receive the funds
Is usually followed unless there's a reason not to
Operates independently of your will

Bottom line: Both matter. Make a will AND update your pension nominations.

Frequently Asked Questions {#faq}

Key Takeaways

Nominations override wills - Update your beneficiary form, not just your will
Under 75 = tax-free - Beneficiaries receive the pot with no tax
Over 75 = income tax - But still IHT-free
State Pension doesn't pass - Only spouse benefits exist
Check old pensions - Previous employers' schemes need updating too

Next Steps {#next-steps}

Last updated: January 2026. Pension rules can change. This guide is for informational purposes only and does not constitute financial advice. Consult a financial adviser for your specific situation.

What Happens to Your Pension When You Die UK? (Complete Guide)