What Happens to Your Pension When You Die UK — Complete Guide

Understanding pension death benefits helps ensure your retirement savings go to the right people.

Types of Pension Death Benefits

Overview by Pension Type

Pension Type	What Happens on Death
Defined contribution	Can pass entire fund to anyone
Defined benefit	Usually 50% to spouse
State pension	Generally stops
Annuity	Depends on type purchased

Defined Contribution Pensions

Death Before 75

Benefit	Details
Full fund	Passes to nominees
Tax	Completely tax-free
Payment options	Lump sum or drawdown
Who can inherit	Anyone you name

Death After 75

Benefit	Details
Full fund	Passes to nominees
Tax	Income tax at beneficiary’s rate
Payment options	Lump sum or drawdown
Who can inherit	Anyone you name

Tax Comparison

Age at Death	Beneficiary’s Tax
Under 75	0% (tax-free)
Over 75	20-45% (their marginal rate)

Example: £200,000 Pension Pot

If You Die At	Beneficiary Receives
74	£200,000 (tax-free)
76 (they’re basic rate)	£160,000 after tax
76 (they’re higher rate)	£120,000 after tax

Nomination Forms

Why They Matter

Aspect	Details
Separate from will	Pension trustees decide
Expression of wish	Usually followed
Speed	Can pay quickly
Flexibility	Change anytime
IHT benefit	Outside estate

Who to Nominate

Option	Consideration
Spouse/partner	Most common
Children	If adult
Trust	For minor children
Anyone	Not restricted
Multiple people	Percentage shares

Keeping Updated

Update When	Why
Marriage	New spouse
Divorce	Remove ex
Children born	Add them
Bereavement	Remove deceased
Annually	Review anyway

Defined Benefit Pensions

Typical Death Benefits

Benefit	Amount
Spouse’s pension	50% of your pension
Children’s pension	25-50% (age-limited)
Death in service lump sum	2-4x salary
Commutation	Rarely available

Spouse’s Pension

Factor	Details
Percentage	Usually 50%, some 66.67%
Calculation	Of your pension at death
Lifetime	For their life
Indexed	Usually increases

Children’s Pension

Factor	Details
Payable to	Dependent children
Age limit	Usually 18 (23 if student)
Amount	25-50% typically
Per child	Or shared

Death Before Retirement

Benefit	Typical
Lump sum	2-4x salary
Partners pension	Varies by scheme
Based on	Prospective service

Death After Retirement

Benefit	Typical
Spouse’s pension	50% of your pension
Any guarantee period	E.g., 5-year guarantee
Lump sum	If within guarantee

State Pension

What Survives

Element	What Happens
Basic state pension	Stops
New state pension	Stops
Additional pension (pre-2016)	May be inherited
Protected payment	May pass to spouse

Inherited State Pension

If Deceased Had	Spouse May Inherit
SERPS (pre-2002)	Up to 50%
S2P (2002-2016)	Some amount
Protected payment	Possibly

Bereavement Support Payment

Element	Details
Who	Surviving spouse/civil partner
First payment	£3,500
Monthly payment	£350 for 18 months
Total	£9,800
Requirement	Under State Pension age

Annuities

Death and Annuities

Annuity Type	On Death
Single life	Payments stop
Joint life	Continues to spouse
Guaranteed period	Payments for remaining period
Value protected	Remainder paid out

Options at Purchase

Feature	Effect on Income	Death Benefit
Single life	Highest	None
Joint life (50%)	Lower	50% to spouse
10-year guarantee	Lower	Payments continue
Value protection	Lower	Return of fund

Already Have Annuity?

Check	Why
Your contract	What you selected
Spouse percentage	If joint life
Guarantee period	How long left
Value protection	If included

Tax Efficiency

Pensions vs Other Assets

Asset	IHT	Income Tax
Pension (under 75)	None	None
Pension (over 75)	None	Beneficiary’s rate
Bank savings	40%	None
ISA	40%	None
Property	40%	None

Strategy: Spend Other Assets First

Approach	Benefit
Spend savings/ISAs	They’re in IHT estate
Preserve pension	Tax-efficient inheritance
Live off taxable income	Let pension grow

Practical Steps

What to Do Now

Action	Details
1. Find all pensions	Including old ones
2. Complete nominations	For each pension
3. Understand benefits	Request benefit statements
4. Keep records	For family
5. Review regularly	Update after changes

Finding Old Pensions

Method	How
Pension Tracing Service	Free government service
Old employers	Contact HR/pensions
Old paperwork	Check files
Previous addresses	May have post

Your Family Should Know

Important Information

They Need	Why
Which pensions	To claim from
Scheme contacts	For notification
Nomination forms	To check they’re beneficiaries
Death certificates	Multiple copies needed

Documentation Location

Document	Keep
Pension statements	Together
Nomination forms	Copies
Contact details	Each scheme
Login info	If online access

Claiming After Death

Process

Step	Action
1	Notify pension provider
2	Provide death certificate
3	Trustees review nomination
4	Decision made
5	Payment to beneficiaries
6	Choose lump sum or drawdown

Timeline

Stage	Typical Time
Initial notification	Immediate
Processing	2-6 weeks
Payout	1-3 months
Complex cases	Longer

Summary

Pension Type	Main Benefit	Tax (Under 75)	Tax (Over 75)
DC pension	Full fund	Tax-free	Income tax
DB pension	50% to spouse	Usually tax-free	Income tax
Annuity	Per contract	N/A	Varies
State pension	Stops	N/A	N/A

Key Actions	Priority
Complete nominations	Critical
Keep updated	Important
Tell family	Essential
Consider tax position	Beneficial