Comparison · Retirement · 2026
SIPP Death Benefits vs Annuity Death Benefits UK 2026
A SIPP can generally be passed on flexibly to beneficiaries when you die, while a basic annuity often leaves nothing behind unless you chose joint life or guarantee features at purchase. Here is how death benefits compare between the two for 2026.
TL;DR - 30-Second Summary
- - SIPP: remaining fund generally passes to nominated beneficiaries, tax-free if death is before age 75
- - Basic single life annuity: usually stops on death with nothing passed on, unless joint life/guarantee added
- - Death before/after 75 changes the tax treatment for beneficiaries on both products
Side by Side: SIPP vs Annuity Death Benefits
| Feature | SIPP | Annuity (basic, single life) |
|---|---|---|
| What passes on death | Remaining fund value | Nothing, unless joint life/guarantee added |
| Beneficiary flexibility | Lump sum, drawdown, or annuity purchase | Fixed by the option chosen at outset |
| Death before age 75 | Usually tax-free to beneficiaries | Usually tax-free where a benefit is payable |
| Death at/after age 75 | Beneficiary pays income tax on withdrawals | Beneficiary pays income tax on ongoing payments |
Frequently Asked Questions
What happens to a SIPP when the holder dies?
Any remaining SIPP fund can normally be passed to nominated beneficiaries, who can choose to take it as a lump sum, continue it in drawdown, or use it to buy an annuity — the choice generally rests with the beneficiary, subject to the scheme rules.
What happens to an annuity when the holder dies?
It depends entirely on the annuity type chosen at purchase. A single life annuity with no guarantee period usually stops paying immediately on death, with nothing passed on. A joint life annuity continues paying a reduced income to a surviving spouse/partner. A guarantee period annuity continues paying (or pays a lump sum) for the remainder of a fixed guarantee term even if death occurs early.
Is a SIPP or an annuity better for leaving money to family?
A SIPP generally offers far more flexibility and potential value to pass on, since any unused fund can go to beneficiaries. A basic single life annuity with no guarantee or joint life option typically leaves nothing behind, which is the trade-off for its higher guaranteed income while the annuitant is alive.
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How is tax different before and after age 75?
For both SIPPs and annuities, death before age 75 generally allows benefits to be paid to beneficiaries tax-free (within the relevant allowances), while death at or after age 75 usually means beneficiaries pay income tax at their own marginal rate on withdrawals from an inherited SIPP, or on ongoing annuity payments, subject to the specific product and scheme rules.
Can I add features to an annuity to protect my family?
Yes — joint life options, guarantee periods (e.g. 5 or 10 years) and value protection (returning any unused purchase price, less income already paid) can all be added at outset, but each of these features reduces the starting income compared with a basic single life annuity with no protection.
Should I choose based purely on death benefits?
No — the primary purpose of an annuity is guaranteed income for life, and of a SIPP is flexible, invested drawdown income. Death benefits are an important secondary consideration, especially if leaving money to family matters to you, but should be weighed alongside income certainty, investment risk and your own life expectancy.
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Disclaimer: This is educational information, not financial advice. Pension death benefit rules are complex and can change — see gov.uk/tax-on-pension-death-benefits and take regulated financial advice on nominating beneficiaries and choosing annuity options.
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