Nominee vs Successor Drawdown: Pension Death Benefits Explained 2026/27

Why these terms exist

When someone dies with money left in a defined contribution pension (such as a SIPP or workplace pot they had already moved into drawdown), the scheme rules allow that money to be passed on without necessarily being cashed out immediately. Two related terms describe how the money can keep moving down a chain of beneficiaries: nominee drawdown and successor drawdown.

Nominee drawdown: the first step

When a pension scheme member dies, they can have nominated one or more beneficiaries to inherit their pension — this does not have to be a spouse, civil partner or financial dependant; it can be an adult child, a friend, or anyone else named on an expression of wishes form.

If that nominated person chooses to keep the money invested in a pension wrapper and draw an income from it over time, rather than taking it all as a cash lump sum, this is called nominee drawdown. The nominee becomes, in effect, the new "owner" of that pension pot for drawdown purposes, even though they never made any contributions to it themselves.

Worked example: David dies at age 68 with £400,000 in his SIPP, having nominated his daughter Sophie as beneficiary. Sophie chooses nominee drawdown rather than a lump sum, keeping the £400,000 invested and drawing an income from it as she needs. Because David died before age 75, Sophie's withdrawals are tax-free (subject to the lump sum and death benefit allowance).

Successor drawdown: continuing the chain

The pension does not have to stop with the nominee. If Sophie, in the example above, later dies while she still has money left in her inherited (nominee) drawdown account, she can have nominated her own beneficiary — called a successor — to inherit what remains and continue drawdown in turn. This is successor drawdown.

Crucially, this chain is not limited to one further step. A successor can nominate their own successor when they die, and so on, potentially keeping pension wealth invested across multiple generations, each new person becoming a fresh "successor" of the previous one.

How the tax treatment carries through the chain

The key rule that surprises many people is that the tax-free or taxable status of withdrawals is fixed by reference to the age of the original scheme member when they died — not the age of the nominee or successor currently drawing the income, and not their age when they in turn die.

• If the original member died before age 75: nominees and all subsequent successors down the chain can normally draw the inherited fund tax-free (within the lump sum and death benefit allowance, currently £1,073,100).
• If the original member died at 75 or over: nominees and successors pay Income Tax at their own marginal rate on withdrawals, for as long as the money remains in the chain.

This means a successor several steps down the chain, drawing an income decades after the original member died, is still taxed (or not taxed) based on how old that original member was when they died — the rule does not reset at each step.

Choosing drawdown over a lump sum

Nominees and successors are not forced to take drawdown — they can usually elect to take some or all of the fund as a lump sum death benefit instead, with the same tax rule based on the original member's age at death applying. The attraction of drawdown, especially where the original member died under 75, is that the money can continue growing tax-efficiently within the pension wrapper, and further withdrawals in later years remain within the same beneficial tax treatment, rather than being paid out as one taxable (or partially taxable) lump sum immediately.

The upcoming Inheritance Tax change

Under current rules, most defined contribution pension funds sit outside a person's estate for Inheritance Tax purposes, which is one reason nominee and successor drawdown chains have become a popular estate-planning tool — wealth can be passed down without an Inheritance Tax charge at each step. However, the government has confirmed that from April 2027, most unused pension funds and death benefits will be brought within the scope of Inheritance Tax. Anyone relying on pensions as a tax-efficient way to pass wealth down a nominee/successor chain should review their plans in light of this upcoming change.