What happens to my pension when I die in the UK?

Full answer

When you die, what happens to your pension depends on the type and your age. For defined contribution (DC) pensions -- workplace pots and personal pensions -- you nominate beneficiaries using an expression of wishes form with your provider. The pension trustee usually follows this nomination, but it is discretionary, meaning the pension sits outside your estate and avoids Inheritance Tax in most cases. If you die before age 75, beneficiaries can typically receive the whole fund tax-free, either as a lump sum or drawn down over time, subject to the Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100 for tax-free lump sums. If you die aged 75 or over, any inherited drawdown withdrawals are taxed as income of the beneficiary at their marginal Income Tax rate -- there is no tax-free amount. The Lump Sum Allowance (LSA) of £268,275 applies to the tax-free portion of pension commencement lump sums taken in your lifetime, but the death benefit rules are governed separately. From April 2027, the government plans to bring inherited pension pots into the Inheritance Tax regime, which would fundamentally change the planning landscape. Until then, DC pensions remain a highly tax-efficient way to pass wealth to the next generation. Defined benefit (final salary) pensions work differently: on death they typically pay a spouse or dependant pension (often 50% of your pension), a lump sum of 2-4 times salary if you die in service, or reduced benefits if you die after retirement. State Pension does not pass to beneficiaries other than through inherited additional State Pension rules. Keep your nomination forms up to date, especially after marriage, divorce or having children. Use a pension calculator to model how much your pot could be worth and the tax position for your beneficiaries.

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