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What happens to my pension if I die depends on the type of pension, its scheme rules and, for private pension benefits, my age when I die. According to HM Revenue & Customs, benefits paid when someone dies under age 75 will normally be tax-free, subject to the applicable allowance. If they die aged 75 or over, beneficiaries will normally pay Income Tax on withdrawals at their marginal rate.
It is understandable to ask what happens to your pension if you die, and whether it could support the people you care about. The details matter: a defined benefit pension works differently from a pension pot, while an annuity’s guarantees can determine whether payments continue to someone else.
This article explains how private pension death benefits and tax work, what annuity guarantees and dependant income can mean, and how pension savings fit into estate planning. It also covers practical steps, such as keeping nominations up to date and understanding the rules for each scheme, so you can make informed decisions.
What are the private pension rules after death?
Private pension benefits depend on the scheme, pension type and choices made during retirement. Marital status can matter, but a spouse does not automatically receive every pension benefit.
Pension beneficiary nominations
A pension beneficiary nomination tells your pension provider who you would like to receive death benefits. Workplace and private schemes commonly use an Expression of Wish or Nomination form. Naming a spouse, civil partner, child or another person helps the provider understand your intentions, although scheme rules determine who can receive benefits and how they are paid.
Review the form after a marriage, divorce, bereavement or another change in family circumstances. A nomination made before a relationship changed may no longer reflect your wishes. A child under age 23 may qualify as a dependant for pension death benefits, subject to the scheme’s rules.
Early access and death benefits
Taking pension savings early can reduce what remains for beneficiaries, because withdrawals lower the pension pot. Early access could also affect eligibility for benefits, so consider this before deciding. If you have income protection, pension income could reduce your payments. Check how your policy treats that income before accessing your pension.
For example, someone approaching retirement who takes a lump sum may leave less in a defined contribution pension for a nominated beneficiary. Defined benefit pensions work differently: benefits follow scheme rules rather than reflecting a remaining pot.
Tax on pension death benefits
Age at death affects how beneficiaries are taxed on private pension benefits. According to HM Revenue & Customs, pension death benefits paid when someone dies under age 75 will normally be free from tax, subject to the applicable allowance. Beneficiaries who inherit a pension after its holder dies aged 75 or over will normally pay Income Tax on withdrawals at their marginal rate.
The same inherited pension can have different tax outcomes depending on the deceased person’s age and the beneficiary’s circumstances. Tax treatment depends on individual circumstances and can change over time, so any tax benefits vary and are not guaranteed.
Death benefit allowances and claims
From 6 April 2024, the Lump Sum and Death Benefit Allowance replaced the lifetime allowance rules. It sets a limit relevant to certain tax free lump sums and death benefits. For NHS pension death benefits, the allowance is £1,073,100 from 6 April 2024. Any tax due depends on the payment and the beneficiary’s circumstances.
Pension providers do not share a single payment timetable. After notification, a provider assesses the claim under its scheme rules and may request a death certificate, claimant identification and completed claim forms. The person handling the affairs should contact the provider to find out which documents are needed. Keeping pension details and nomination records accessible can help beneficiaries identify the scheme and start a claim.
Are pensions subject to inheritance tax?
For a surviving partner, the answer depends on the pension type, marital status and date of death. State Pension inheritance follows different rules from private pension savings and inheritance tax.
Only a spouse or civil partner can inherit payments based on a deceased person’s State Pension. Eligibility depends on both partners’ National Insurance records and when they reached, or will reach, State Pension age. An unmarried partner cannot inherit a State Pension through this route, even if they shared a home for many years.
The rules differ around 6 April 2016. A spouse or civil partner who reached State Pension age before that date and does not receive the full State Pension may qualify for a higher payment after their partner dies. Someone who reached State Pension age on or after 6 April 2016 may be able to inherit an extra payment on top of the new State Pension. This depends on when the relationship began and when their partner died.
Timing matters. Extra State Pension payments can only be claimed once the surviving partner is over State Pension age. Someone who remarries or forms a new civil partnership before reaching State Pension age will not receive State Pension based on their deceased spouse’s or civil partner’s National Insurance contributions.
Pension inheritance tax changes
Pension inheritance tax rules are changing, so the date a person dies can affect how unused pension funds are treated. According to HM Treasury, from 6 April 2027, unused pension funds and pension death benefits will be brought into a person’s estate for UK inheritance tax purposes.
Before that change, UK pension savings are usually outside the deceased person’s estate and usually do not incur inheritance tax. However, arrangements can differ. For example, a NEST pension nomination usually means the pot forms part of the member’s estate for inheritance tax purposes. Consider how each pension fits into the wider estate rather than assuming every nomination has the same effect.
Tax on inherited defined contribution pensions
A defined contribution pension is a pot of savings, and its inheritance tax treatment is separate from the income tax due when a beneficiary withdraws money. Under current rules, benefits are normally tax-free if the pension holder dies under age 75, subject to the applicable allowance. If they die aged 75 or over, withdrawals are normally taxed at the beneficiary’s marginal rate.
For example, a surviving civil partner might inherit a pension pot but pay income tax as they draw money from it. Tax treatment depends on individual circumstances and can change over time, so the value of any tax benefits varies and is not guaranteed. From 6 April 2027, inheritance tax may also become relevant to unused funds.
What happens to my pension when I die?
The outcome depends on whether the payment is State Pension, a private pension pot or a defined benefit pension. A spouse or civil partner does not automatically receive every payment.
State Pension payments and death benefits
State Pension payments normally stop when the recipient dies, so they do not continue as a regular payment to family. If someone dies before claiming their State Pension, their estate can claim up to three months of unpaid pension.
If someone dies before reaching State Pension age, neither they nor someone close to them receives payments from that State Pension. A surviving spouse or civil partner can sometimes inherit an extra amount, depending on both partners’ National Insurance records and when they reached State Pension age. An unmarried partner cannot inherit State Pension through this route.
For example, a widow who already receives the new State Pension could qualify for an extra inherited payment, but only once she is over State Pension age. Remarriage or a new civil partnership before reaching that age affects entitlement based on a former partner’s National Insurance contributions.
Defined benefit pension death benefits
A defined benefit pension provides an income calculated under scheme rules, rather than simply paying out the member’s remaining savings. After the member dies, some schemes stop payments; others provide a spouse, partner or dependant pension, or a lump sum. The scheme’s definition of an eligible dependant and the member’s retirement choices shape the outcome.
NHS pensions show how retirement timing can matter. If an NHS member dies within five years of retiring, a balancing lump sum may be payable. It is calculated as five years of pension, less pension already received, subject to limits specific to the scheme.
For NHS 1995 and 2008 section members, the death deficiency lump sum is limited to the lesser of the five year pension balance and twice the relevant pay or earnings measure at retirement, less any retirement lump sum taken. NHS 2015 members have a related limit, based on twice the lump sum that would have been payable on death during active membership, less any retirement lump sum taken by commutation.
Benefits without a nominated beneficiary or will
If there is no nomination, the pension provider applies the scheme’s rules to decide who can receive benefits. A pension is passed separately from the deceased person’s estate and Will, so a Will does not itself instruct the provider to pay a particular person.
This distinction matters for a spouse, civil partner or unmarried partner. The scheme may consider eligible dependants and its payment options, rather than simply following the family’s expectations. For NHS pension members, an unmarried partner must be nominated, and the member must be free to marry or enter a registered civil partnership for that nomination to be valid.
An NHS death lump sum must be claimed and paid within two years of death; otherwise, it becomes an unauthorised payment and may be subject to tax of up to 45%. The person dealing with the member’s affairs should contact the pension provider promptly, identify the scheme and ask about its claim process. That helps establish which benefit rules apply and who the provider can consider.
Annuity guarantees and dependant income
An annuity turns pension savings into an income, and its terms affect what happens after the holder dies. A single life annuity will usually stop paying when its holder dies. A joint life annuity can continue payments to a chosen beneficiary, such as a spouse or civil partner.
This distinction matters when comparing retirement income with provision for someone who may depend on it. Someone choosing a single life annuity should understand that payments usually end at death. With a joint life annuity, payments can continue to the nominated beneficiary under the agreed terms. Those terms usually cannot be changed once the annuity is set up.
Some providers may offer a guarantee or value protection. With value protection, up to 100% of the amount used to buy an annuity may be protected. This can provide a lump sum for a beneficiary, depending on the chosen terms and any income already paid. It is a different arrangement from continuing regular income through a joint life annuity.
For example, someone retiring with a spouse might compare an annuity that pays only during their lifetime with one that can continue to their spouse. The choice affects both the person’s retirement income and the provision available to their partner. Annuity terms are usually fixed after setup, so the decision has consequences beyond the first payment.
NHS pension members have separate dependant income options set by their scheme. An adult dependent’s short-term pension is paid for three months, or six months if there are dependent children. A dependent child may qualify for a child allowance if under age 23, subject to the scheme’s dependency rules. These benefits are not annuity guarantees, so do not assume the same terms apply.
An NHS member may also elect to allocate up to a third of their pension to a dependant, with the election made within one month of retirement. This reduces the member’s pension in exchange for potential income for the dependant after the member dies. The timing matters: the election must be made within that one-month period.
Marital status can affect who qualifies under a scheme, but it does not make every spouse or civil partner automatically eligible. For NHS members, an unmarried partner must be nominated, and the member must be free to marry or enter a registered civil partnership for that nomination to be valid. National Insurance contributions matter for some State Pension entitlements, but they do not determine annuity beneficiaries.
Before retirement, compare the income payable during your lifetime with what could continue to a dependant. Check whether the arrangement is a single life annuity, joint life annuity or includes value protection. These terms describe different payment outcomes, and the selected contract determines what a nominated person may receive.
Estate planning and practical preparation
Estate planning works best when pension records reflect your current family circumstances. A pension scheme may pay benefits separately from your estate and Will, so reviewing estate documents alone will not update a workplace pension nomination.
Start by listing each workplace pension, private pension and annuity, alongside the provider’s contact details. Record whether each arrangement is a pension pot, defined benefit scheme or annuity. These labels matter because they describe different benefits and payment terms. A former employer’s workplace scheme can be easy to overlook after changing jobs.
Next, find the nomination form for each pension scheme and check who is named. A spouse, civil partner or other dependant may be treated differently under each scheme’s rules. If you have divorced, remarried or lost a partner, revisit your nominations to check they still reflect your wishes. A form completed years ago may no longer fit your family situation.
Keep a practical record for the person who may need to handle your affairs. Include:
Each pension provider’s name and contact details.
The pension scheme type and any available member reference.
Where nomination forms and recent statements are stored.
Whether an annuity includes a guarantee or dependant income.
The names of nominated beneficiaries and the date you last reviewed them.
For example, someone who has moved from employment to running a business might have an old workplace pension and a newer private arrangement. Listing both in one record helps their family identify separate providers and reduces the chance of missing a scheme while dealing with the estate.
After a death, the person handling the affairs should contact each pension provider. Ask for its claim process and required documents, then keep copies of correspondence and submitted forms. Providers need enough information to identify the member and assess who may qualify under the scheme. The process can differ between a workplace pension, an annuity and a defined benefit arrangement.
Review pension records after a major life change and as part of retirement planning. If you have an unmarried partner, do not assume that living together creates the same pension rights as marriage or civil partnership. Some schemes require a nomination and may apply eligibility conditions. Record the scheme’s requirements while the member can still clarify their intentions.
Keep the information secure but accessible to the person likely to manage your affairs. A current pension list, clear provider details and recent nominations give them a useful starting point. This practical preparation connects your pension choices with the wider estate plan, rather than leaving family members to piece together workplace and private arrangements later.
Her Financial Planning: Retirement Planning
Her Financial Planning provides Retirement Planning to help women consider pension choices alongside their wider financial plans. I can help you understand how retirement income, annuity terms and provision for a spouse or civil partner fit together. This can be useful before retirement, after a change in relationship status, or when bereavement has altered your financial picture.
My approach is personal, because the right questions depend on your pension arrangements, priorities and circumstances. I can look at how your plans connect, including whether your records and beneficiary nominations reflect your wishes. If you would like to discuss your circumstances, contact Her Financial Planning.
Make your next pension decision with clarity
Thinking about what happens to my pension if I die can bring wider questions into focus: what do I want retirement to look like, and who may depend on my plans? These are personal decisions, especially after a relationship change or bereavement. You do not have to resolve every detail at once. A useful next step is to set out what matters most and consider how your pension fits with the rest of your financial life.
At Her Financial Planning, I provide Retirement Planning and Investment Planning, as well as Divorce Financial Advice when relationship changes affect your financial decisions. I can help you consider these choices in light of your circumstances, without losing sight of the people and priorities that matter to you.
If you would like to talk through your next step, contact Her Financial Planning. A thoughtful conversation can help you decide what to focus on first.
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Frequently Asked Questions
How can I provide more benefits to my dependants?
Review the options available through your pension and the income your family may need. For example, when arranging an annuity, compare single life and joint life terms, and consider whether value protection is available. An NHS pension member may elect to allocate up to a third of their pension to a dependant, with the election made within one month of retirement. This choice reduces the member’s own pension.
How can my loved ones access my pension funds?
Your loved ones should contact each pension provider and explain that the member has died. The provider can outline its claim process and explain which options apply under that scheme. For a pension pot, available choices depend on the scheme’s terms and the beneficiary’s circumstances. Keep provider names and pension records somewhere your chosen representative can find them, so they can identify each arrangement and start the relevant claims.
How do you nominate a beneficiary?
Ask your pension provider for its Expression of Wish or Nomination form, then name the people you would like considered for benefits. Complete every required section and return it through the provider’s process. Keep a copy with your pension records and review it after a marriage, divorce or other major family change. A nomination records your wishes, but scheme rules determine who can receive benefits and how they are paid.
How much lump sum is payable to my dependants?
There is no single lump sum that applies to every pension. The amount depends on the pension type, scheme rules, your retirement choices and any benefits already paid. For an NHS member who dies within five years of retirement, a balancing lump sum may be calculated using five years of pension less pension already received, subject to scheme-specific limits. Check the relevant scheme’s rules to understand how it is calculated.
Should I include my pension in my Will?
A Will does not usually instruct a pension provider to pay benefits to a particular person, because pension benefits are generally handled separately from the estate. Still, your Will and pension nominations should reflect compatible wishes. For example, after divorce, review both your Will and the beneficiary details held by each pension provider. A solicitor can advise on Will wording, while the pension provider explains its nomination process.
What happens to an annuity when I die?
A single life annuity will usually stop paying when its holder dies. A joint life annuity can continue income to a chosen beneficiary, such as a spouse or civil partner. Some providers also offer value protection, which may return some or all of the amount used to buy the annuity, subject to its terms and payments already made. Review the contract, because annuity terms usually cannot be changed after setup.
What happens to a UK workplace pension when you die?
What happens to a workplace pension depends on whether it is defined benefit or defined contribution. A defined benefit scheme may stop payments, pay a dependant pension or provide a lump sum under its rules. A defined contribution pension is a pot, and its scheme sets the options available to beneficiaries. Tell your representative which employers you worked for, since a previous workplace scheme may have a separate provider and nomination record.
SJP approved xx/xx/xxxx
Article by Shalini Goldfinch
I am Shalini Goldfinch, a Chartered Financial Planner and the founder of Her Financial Planning, a financial planning Practice based in Liverpool working with women across England. I specialise in financial planning for women, and in particular high-earning professionals, female business owners and founders, and women going through major life changes such as divorce, bereavement, inheritance, or the sale of a business. My work covers retirement and pension planning, investing, protection, inheritance and estate planning, and divorce financial settlements, always shaped around each woman’s individual goals.
Much of the financial advice industry was built around a male default, and too many women have felt talked down to, dismissed, or left out of decisions about their own money. I do things differently. I offer a warm, jargon-free space where women can ask questions openly, understand their finances properly, and make confident, informed decisions.
