What Happens to Your Pension If You Die Before 75 UK — Complete Guide
What happens to your pension when you die before age 75. Who inherits, tax rules, how beneficiaries receive the money, and how to ensure your pension goes to the right people.
·6 min read
Your pension can be one of the most valuable assets you leave behind — and dying before 75 means your beneficiaries can receive it completely tax-free. Here’s how it works.
Key Age: Before vs After 75
Tax Treatment by Age at Death
Age When You Die
Tax on Inheritance
Before 75
Tax-free to beneficiaries
75 or older
Income tax at beneficiary’s marginal rate
This makes dying before 75 significantly more advantageous for your beneficiaries from a tax perspective.
Why 75 Is The Critical Age
Scenario
Beneficiary Tax
You die at 74
0% tax
You die at 75 or later
Up to 45% tax
Difference
Could be £100,000s in tax
Types of Pension and Inheritance Rules
Defined Contribution Pensions (Most Common)
These include workplace pensions, SIPPs, and personal pensions.
Death Before 75
What Happens
Uncrystallised (not yet accessed)
Passes to beneficiaries tax-free
Crystallised (drawdown)
Passes to beneficiaries tax-free
Annuity purchased
Depends on annuity type (see below)
Defined Benefit Pensions (Final Salary)
Benefit
Who Receives
Typical Amount
Spouse’s pension
Husband/wife/civil partner
50-66% of your pension
Dependant’s pension
Children under 23 or disabled
50% of spouse pension
Lump sum death benefit
Nominated beneficiaries
2-4× salary (if in service)
Note: DB pensions can’t pass the entire pot to anyone you choose — they follow scheme rules.
State Pension
Scenario
Inheritance
Before State Pension age
Nothing passes
Drawing State Pension
Spouse may inherit some/all
Surviving spouse
May get extra based on your NI record
How Beneficiaries Receive the Pension
Options for Beneficiaries (DC Pensions)
Option
How It Works
Lump sum
Take entire pot at once
Drawdown
Transfer to their name, draw income
Annuity
Buy guaranteed income for their life
Combination
Mix of above
Tax Treatment (Before 75 Death)
How Beneficiary Takes It
Tax
Lump sum
Tax-free
Drawdown income
Tax-free
Annuity purchased
Tax-free
Tax Treatment (After 75 Death)
How Beneficiary Takes It
Tax
Lump sum
Income tax at their marginal rate
Drawdown income
Income tax at their marginal rate
Annuity
Income tax at their marginal rate
Nominating Beneficiaries
Why Nomination Is Essential
With Nomination
Without Nomination
Quick payout
Provider decides
Your choice respected
May not match wishes
Clear instructions
Potential disputes
Avoids delays
Can take months longer
Who You Can Nominate
Beneficiary Type
Notes
Spouse/civil partner
Most common
Children
Any age
Grandchildren
Often overlooked
Unmarried partner
Must be nominated
Other family
Siblings, nieces, nephews
Anyone
Friends, charities
Trust
For complex situations
How to Nominate
Step
Action
1
Contact each pension provider
2
Request nomination/expression of wish form
3
Complete with beneficiary details
4
Specify percentages (must total 100%)
5
Return to provider
6
Review every 2-3 years or after life changes
Important Notes on Nominations
Fact
Explanation
Not legally binding
Providers have discretion but almost always follow
Keeps pension outside estate
Avoids inheritance tax
Can nominate multiple people
Split percentages as you wish
Update after life events
Marriage, divorce, births, deaths
Each pension needs own form
One form per provider
Inheritance Tax Position
Pensions and IHT
Position
Tax Consequence
Pension remains in fund
Usually outside estate — no IHT
Paid to discretionary beneficiary
No IHT
Paid to estate (no nomination)
May be subject to IHT
How Pensions Avoid IHT
Requirement
Why It Matters
Valid nomination in place
Provider pays directly to beneficiary
Provider discretion
Payment not “automatic” = not your estate
Not “settled” in lifetime
Funds held by trustees
Planning Tip
Pensions are often the most IHT-efficient assets to leave. Consider:
Drawing from ISAs and other assets first
Leave pension pot to grow
Pass pension to next generation tax-efficiently
Specific Scenarios
Death While Still Working
Situation
Benefit
Member of workplace pension
Lump sum (often 2-4× salary)
Plus pension pot
Passes to beneficiaries
If death benefit in scheme
Check scheme rules
Death with Annuity Already Purchased
Annuity Type
What Happens
Single life, no guarantee
Payments stop — nothing passes
Joint life
Payments continue to survivor
Guarantee period
Payments continue until period ends
Value protected
Remaining value paid out
Lesson: If leaving inheritance is important, consider this when buying an annuity.
Death Between Accessing and 75
Scenario
Tax Position
Started drawdown at 60, die at 70
Remaining pot passes tax-free
Started drawdown at 60, die at 76
Remaining pot taxed at beneficiaries’ rate
Small Pension Pots
Pot Size
Options
Under £10,000
May be paid as trivial commutation
Multiple small pots
Each treated separately
What Beneficiaries Need to Do
Steps to Claim
Step
Action
1
Notify pension provider of death
2
Provide death certificate
3
Complete claim form
4
Provide ID documentation
5
Confirm how to receive funds
6
Funds paid (typically 10-30 days)
Decisions Beneficiaries Make
Decision
Options
Take lump sum?
Or keep invested
Start drawdown?
Draw income as needed
Buy annuity?
Guaranteed income
Provider choice
Stay or transfer
Time Limits
Action
Deadline
Claim payment
Usually 2 years (but no legal deadline)
Tax-free treatment
Must be before 75 death
Express wishes
None, but don’t delay
Multiple Beneficiaries
How Splitting Works
Example
Outcome
50% to spouse, 25% each to 2 children
Each receives their share
Each makes own decisions
Lump sum, drawdown, or annuity
Tax position
Same for all (before/after 75 rule)
Contingent Beneficiaries
Primary
Contingent
When Contingent Used
Spouse
Children
If spouse predeceases you
Worth setting up
Yes
Avoids intestacy issues
Planning Strategies
Maximise Tax-Free Inheritance
Strategy
Benefit
Leave pension untouched if possible
Passes outside IHT
Spend other assets first
ISAs, savings, property
Consider drawdown
Flexibility for inheritance
Avoid annuity if inheritance matters
Stops at death (unless protected)
If You’re Approaching 75
Action
Reason
Review nominations
Ensure up to date
Consider health
If poor, beneficiaries benefit from before-75 death tax treatment