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.
Pension information is based on current UK legislation. Pensions are regulated by the FCA and The Pensions Regulator. This is not financial advice — consider consulting an FCA-regulated financial adviser.
Contents
Your pension can be one of the most valuable assets you leave behind — and dying before 75 means your beneficiaries can receive it free of Income Tax. Here’s how it works, including the Inheritance Tax change coming in April 2027.
Important update: From 6 April 2027, most unused pension funds and death benefits will be brought into your estate for Inheritance Tax purposes for the first time, following the Finance Act 2026. This section explains the current Income Tax rules (which still apply based on age at death) alongside this upcoming IHT change — read both parts before assuming your pension is entirely tax-free to pass on.
Key Age: Before vs After 75
Income Tax Treatment by Age at Death
Age When You Die
Income 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 an Income Tax perspective. This age-75 rule is unaffected by the April 2027 Inheritance Tax change described below — the two taxes apply separately.
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
Income Tax Treatment (Before 75 Death)
How Beneficiary Takes It
Income Tax
Lump sum
Tax-free
Drawdown income
Tax-free
Annuity purchased
Tax-free
Income Tax Treatment (After 75 Death)
How Beneficiary Takes It
Income 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 (until April 2027)
Currently avoids Inheritance Tax; this changes from 6 April 2027
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
The April 2027 Change
Under the Finance Act 2026 (which received Royal Assent in March 2026), most unused pension funds and death benefits become part of your estate for Inheritance Tax purposes for deaths on or after 6 April 2027. Before this date, the rules below (which describe pensions as generally outside the estate) still apply.
Key points on the reform:
Death-in-service benefits paid from a registered pension scheme are excluded from IHT.
Pension death benefits passing to a surviving spouse or civil partner (if a long-term UK resident) or to a registered charity remain exempt, as with other assets.
Personal representatives (not pension scheme administrators) will generally be responsible for reporting and paying any IHT due on unused pension funds.
The government estimates around 10,500 estates a year will become newly liable for IHT as a result — a minority of estates with pension wealth, but a significant change for larger pots.
Pensions and IHT — Rules to 5 April 2027
Position
Tax Consequence (to April 2027)
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 Currently Avoid IHT (Until April 2027)
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
From 6 April 2027, most unused pension funds will be included in the estate for IHT regardless of nomination — though a valid nomination still matters for deciding who receives the funds and for the Income Tax treatment described above.
Planning Tip
Pensions are, until April 2027, among the most IHT-efficient assets to leave. From April 2027 this advantage is significantly reduced (though not eliminated — spousal/civil partner and charity exemptions continue). If you hold a large pension pot, consider:
Reviewing your overall estate plan with a qualified financial adviser ahead of April 2027
Drawing from ISAs and other assets first (still sensible for Income Tax reasons, though it no longer avoids IHT on the pension after April 2027)
Discussing with an adviser how the new IHT charge interacts with the Income Tax charge on death after 75, since double-taxation mitigation rules are expected
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
Income Tax Position
Started drawdown at 60, die at 70
Remaining pot passes free of Income Tax
Started drawdown at 60, die at 76
Remaining pot taxed at beneficiaries’ Income Tax 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)
Income 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-Efficient Inheritance
Strategy
Benefit
Leave pension untouched if possible
Passes free of Income Tax if before 75 (IHT position changes from April 2027)
Spend other assets first
ISAs, savings, property — still sensible, but no longer avoids IHT on the pension after April 2027
Consider drawdown
Flexibility for inheritance
Avoid annuity if inheritance matters
Stops at death (unless protected)
Review estate plan before April 2027
Especially for larger pension pots — take advice
If You’re Approaching 75
Action
Reason
Review nominations
Ensure up to date
Consider health
If poor, beneficiaries benefit from before-75 death Income Tax treatment
No rush to withdraw
Funds remain Income Tax-efficient in pension
For Beneficiaries Planning Ahead
If you’ve inherited a pension:
Strategy
Consideration
Don’t rush
Funds stay invested tax-free (Income Tax)
Consider own tax position
Draw when in lower tax band
Flexi-access drawdown
Control when you pay tax
Use for retirement
Pass your own pension to next generation
Defined Benefit Pension Death Benefits
In-Service Death (While Working)
Benefit
Typical Amount
Lump sum
2-4× annual salary
Spouse pension
Immediate, 50-66% of member pension
Children’s pension
Till age 18-23
Death After Retirement
Benefit
What Happens
Spouse pension
50-66% of your pension continues
Children’s pension
If eligible
No lump sum
Usually already paid or not applicable
Key Differences from DC Pensions
DC Pension
DB Pension
Entire pot passes
Only specified benefits
Any beneficiary
Usually spouse/dependants only
Flexible options
Fixed benefits
Income Tax-free before 75
Spouse pension taxed as income
Summary Comparison
Death Before 75 vs After 75 (Income Tax)
Factor
Before 75
After 75
Lump sum tax
0%
Beneficiary’s marginal rate
Drawdown tax
0%
Beneficiary’s marginal rate
Annuity income
0%
Beneficiary’s marginal rate
Planning value
Excellent
Still good, but taxed
Remember: the before/after-75 rule above is about Income Tax. From 6 April 2027, a separate Inheritance Tax charge may also apply to unused pension funds regardless of the age at which you die — see the Inheritance Tax Position section above.