Pension guide
What happens to my pension when I die?
What happens depends on the type of pension, the scheme rules, who receives the benefits, your age at death and the tax rules applying at the time. It is worth reviewing beneficiary nominations rather than assuming your pension will simply follow your Will.
Start with the pension
Defined contribution and defined benefit pensions can behave very differently on death.
Defined contribution
There may be an unused pension pot that can potentially be paid to beneficiaries as a lump sum, beneficiary drawdown or other permitted benefit, depending on the scheme.
Defined benefit
There is not normally an individual investment pot to inherit. The scheme rules determine whether benefits such as a dependant's pension or death benefit are payable.
Annuities also have their own terms. Whether payments continue after death depends on features selected when the annuity was bought, such as a dependant's income, guarantee period or value protection.
Who receives it?
Keep your expression of wishes or beneficiary nomination up to date.
Many pension schemes operate on a discretionary basis. You can usually tell the provider who you would like to receive pension death benefits, but the scheme trustees or provider may retain discretion under the scheme rules.
Marriage, divorce, bereavement, children or changes in family circumstances are sensible points to check that your pension nominations still reflect your wishes.
Current Income Tax rules
The member's age at death can affect how inherited pension benefits are taxed.
Under current rules, many defined contribution pension death benefits can be paid without Income Tax where the member dies before age 75, subject to the type and timing of the benefit and the deceased's available Lump Sum and Death Benefit Allowance.
Where the member dies aged 75 or over, pension benefits paid to an individual beneficiary are generally subject to Income Tax when the beneficiary receives them.
For 2026/27, the standard Lump Sum and Death Benefit Allowance is £1,073,100, although individual protections and benefits already taken can affect the available amount.
Important change from April 2027
The Inheritance Tax treatment of pensions is changing.
Most unused pension funds and pension death benefits will be brought within the value of the deceased's estate for Inheritance Tax purposes. The reform has been legislated through Finance Act 2026.
The new rules do not mean every inherited pension will automatically suffer Inheritance Tax. Whether tax is due depends on the estate, available exemptions and allowances, the pension benefit and who receives it.
HMRC has confirmed that registered-scheme death-in-service benefits are excluded from the new Inheritance Tax treatment. Certain other benefits are also outside the reforms.
The new regime applies to deaths on or after 6 April 2027, even though the rules in force before that date can still apply to earlier deaths.
Practical review
Five things worth checking now.
1. Pension type
Understand whether each arrangement is defined contribution, defined benefit or an annuity and what death benefits it actually provides.
2. Beneficiaries
Check the expression of wishes or nomination held by each pension provider.
3. Existing benefits
Understand whether guarantees, dependant benefits or other scheme-specific provisions apply.
4. Wider estate
Consider pensions alongside other assets, liabilities, your Will and the changing Inheritance Tax position.
5. Retirement withdrawals
Do not change pension withdrawals solely for inheritance reasons without considering your own retirement income, tax and financial security first.
Pensions & estate planning
Do your pension nominations and retirement plans still fit together?
The 2027 Inheritance Tax changes make it particularly important to consider pensions as part of the wider retirement and estate-planning picture.
Book a conversationThis guide is for general information only and is not personal financial, tax or legal advice. Pension, Income Tax and Inheritance Tax rules can change and their effect depends on individual circumstances. Content checked against current HMRC/GOV.UK guidance and Finance Act 2026 on 15 September 2026.