Pension Planning UK 2026/27 — How Much You Need and How to Get ThereWhat Happens to Your Pension When You Die? UK Guide
Find out what happens to your pension when you die, including workplace pensions, SIPP, state pension, and how to nominate beneficiaries.
Understanding what happens to your pension when you die helps ensure your loved ones are protected and receive what you want them to have.
Pension Types and Death Benefits
Overview
| Pension Type | Death Benefit |
|---|
| Defined contribution (DC) | Pot passes to beneficiaries |
| Defined benefit (DB) | Spouse’s pension (reduced rate) |
| State Pension | Stops (limited spouse inheritance) |
| SIPP | Pot passes to beneficiaries |
| Annuity | Depends on type purchased |
Defined Contribution Pensions (Including Workplace and SIPP)
If You Die Before Age 75
| Benefit Option | Tax Treatment |
|---|
| Lump sum | Tax-free |
| Beneficiary drawdown | Tax-free |
| Annuity purchase | Tax-free |
Key point: Beneficiaries get everything tax-free if you die before 75.
If You Die Age 75 or Over
| Benefit Option | Tax Treatment |
|---|
| Lump sum | Taxed at beneficiary’s marginal rate |
| Beneficiary drawdown | Taxed at marginal rate on withdrawals |
| Annuity purchase | Taxed on income |
Key point: Tax applies at the beneficiary’s income tax rate.
Beneficiary Drawdown
Beneficiaries can:
- Leave the pension invested
- Take income (drawdown) as needed
- Take a full lump sum
- Grow the pot tax-free until withdrawal
Defined Benefit (Final Salary) Pensions
Typical Structure
| Beneficiary | Typical Benefit |
|---|
| Spouse/civil partner | 50% of your pension for life |
| Qualifying children | Smaller pension until certain age |
| Non-spouse partner | Depends on scheme rules |
Key Features
| Feature | Details |
|---|
| Amount | Usually 50-66% of member’s pension |
| Duration | For spouse’s lifetime |
| Escalation | May increase with inflation |
| Nomination | May need to register partner |
Death Before Retirement
If you die before drawing the pension:
| Benefit | Typical |
|---|
| Lump sum | 2-4x your salary (varies by scheme) |
| Spouse’s pension | May be available |
| Refund of contributions | Depends on scheme |
State Pension
Basic Rules
| Event | Outcome |
|---|
| You die | Your state pension stops |
| Spouse inherits? | Possibly part of Additional State Pension |
| New rules (post-2016) | Limited inheritance |
| Old rules (pre-2016) | More generous spouse benefits |
What Spouses May Inherit
| Component | Inheritable? |
|---|
| Basic State Pension | Some circumstances (pre-2016 rules) |
| Additional State Pension | Possibly 50% |
| New State Pension | Generally not inheritable |
| State Pension top-up | May be inherited |
Complex rules: Depends on when both partners reached state pension age.
Bereavement Benefits
Surviving spouses/civil partners may claim:
| Benefit | Eligibility |
|---|
| Bereavement Support Payment | Under state pension age, spouse made NI contributions |
| Widowed Parent’s Allowance | Under state pension age with dependent children |
Annuities
Single Life Annuity
| Event | Outcome |
|---|
| You die | Annuity stops |
| Value remaining | Lost (no residual payment) |
| Cheapest option? | Yes, but no death benefit |
Joint Life Annuity
| Event | Outcome |
|---|
| You die | Annuity continues at reduced rate |
| Partner receives | Usually 50-100% of original |
| Cost | Higher premiums than single life |
Annuity with Guarantee Period
| Event | Outcome |
|---|
| Die within guarantee period | Payments continue until period ends |
| Typical guarantee | 5 or 10 years |
| Die after guarantee | Payments stop |
Value Protection
| Feature | Details |
|---|
| What it does | Returns unused fund to beneficiaries |
| Example | If you paid £100k for annuity, die after £30k paid, £70k returned |
| Tax | Depends on age at death |
Nominating Beneficiaries
Why It Matters
| Benefit | Impact |
|---|
| Speed | Faster payout to intended person |
| Control | You decide who gets your pension |
| Flexibility | Can name anyone (not just family) |
| Tax efficiency | Avoid estate, potentially IHT |
How to Nominate
- Contact each pension provider — separate nomination for each
- Complete nomination form — name, DOB, relationship
- Specify percentages — if multiple beneficiaries
- Update after life changes — marriage, divorce, births
Who Can You Nominate?
| Beneficiary | Allowed? |
|---|
| Spouse/civil partner | Yes |
| Children (any age) | Yes |
| Other family | Yes |
| Friends | Yes |
| Charities | Yes |
| Trust | Yes |
Scheme Administrator Discretion
Important: Most pension nominations are “expressions of wish” — the scheme administrator has final say. This:
- Keeps pensions outside your estate (often IHT-free)
- Usually follows your nomination
- Considers your circumstances at death
Inheritance Tax Considerations
Pensions and IHT
| Situation | IHT Treatment |
|---|
| Most pension schemes | Outside estate, no IHT |
| Cash from drawdown | May be included if already withdrawn |
| Death after 75 | Income tax on inheritance instead |
| Inherited pension | Beneficiaries pay income tax on access |
Why Pensions Are Good for IHT Planning
| Benefit | Details |
|---|
| Outside estate | Not counted for IHT |
| Pass on tax-efficiently | Beneficiaries can use drawdown |
| Spend other assets first | Draw from pensions last |
Steps to Take Now
Review Your Pensions
Questions to Ask Providers
| Question | Why It Matters |
|---|
| What are the death benefits? | Understand what’s payable |
| Is my nomination up to date? | Ensure current wishes recorded |
| Who has discretion? | Understand decision-making |
| What lump sum is payable? | Know the amounts |
| What spouse pension exists? | Understand ongoing benefits |
| Action | Benefit |
|---|
| Share pension details | They know where to claim |
| Explain nominations | Expectations are clear |
| Store documents safely | Easy to find when needed |
| Include in will notes | Executor understands position |
If Someone Dies
Steps to Claim
- Obtain death certificate — multiple copies
- Contact each pension provider — with death certificate
- Provide beneficiary details — ID, bank details
- Choose benefit option — lump sum, drawdown, annuity (for DC)
- Claim state pension bereavement benefits — if applicable
- Seek financial advice — for tax-efficient options
| Pension Type | Contact |
|---|
| Workplace pension | HR department or provider |
| Private pension/SIPP | Provider directly |
| State pension | DWP Bereavement Service |
| Annuity | Annuity provider |
| Lost pensions | Pension Tracing Service |
Summary
| Key Point | Remember |
|---|
| Nominate beneficiaries | Complete forms for each pension |
| Update regularly | After marriage, divorce, births |
| Under vs over 75 | Major tax difference |
| DC pensions | Can be fully inherited |
| DB pensions | Spouse’s pension usually |
| State pension | Mostly stops at death |
| Keep records | Help your family claim |