Defined Benefit Pension on Death: What Happens to a Final Salary Pension?
Unlike a defined contribution pension, a final salary (defined benefit) scheme has no “pot” to nominate. On death it pays a spouse’s pension and possibly a lump sum — calculated by formula, not by account balance. Here is how each type of death benefit works.
DB vs DC: The Critical Difference
Defined contribution (DC)
- → Has a pot of accumulated savings
- → You can nominate who receives the pot on death
- → Pot passes outside estate if trustees follow nomination
- → From April 2027: unspent pot drawn into IHT scope
- → You decide how to take retirement income (drawdown, annuity)
Defined benefit (DB)
- → No pot — pays a guaranteed income based on salary & service
- → Death benefits set by scheme rules, not a nominated pot
- → Typically pays: spouse’s pension + lump sum
- → April 2027 IHT changes: largely don’t apply (no pot)
- → Expression of wishes guides trustees on lump sum distribution
Death Benefits by Member Status
1. Death in Service (Active Member — Before Retirement)
| Benefit | Typical amount | In estate? |
|---|---|---|
| Lump sum death-in-service | 2–4× pensionable salary (varies by scheme) | No — discretionary trust |
| Spouse's / civil partner's pension | 50% of projected pension (varies by scheme) | N/A — ongoing pension income |
| Children's pension | Fraction of projected pension until age 18/23 | N/A — ongoing pension income |
| Dependant's pension | Discretionary — if scheme allows | N/A — ongoing pension income |
2. Deferred Member Death (Left Employer, Not Yet Retired)
| Benefit | Typical amount | Notes |
|---|---|---|
| Lump sum (if applicable) | Return of contributions or 5× deferred pension | Varies widely — check scheme rules; some pay nothing |
| Spouse's / dependant's pension | 50% of deferred pension at normal retirement age | Revalued in line with statutory requirements |
| Children's pension | Often small fraction or nil | Less generous than in-service benefits |
3. Pensioner Death (In Payment — Already Retired)
| Benefit | Typical amount | Notes |
|---|---|---|
| Spouse's / civil partner's pension | 50% of gross pension (varies 33%–67%) | Paid for spouse's lifetime; follows scheme rules on who qualifies |
| Guarantee period lump sum | Balance of guaranteed years if member dies in guarantee period | Commonly 5 or 10 years from retirement |
| Children's pension | Fraction of member's pension until age 18/23 | Only some schemes provide this at retirement |
Why an Expression of Wishes Still Matters for DB Pensions
Although DB death benefits are determined by scheme rules (not by nomination), the lump sum death benefit is held in a discretionary trust and the trustees have discretion over who receives it. An expression of wishes form — completed by the member — guides the trustees on:
- →Who should receive the lump sum (or a share of it) — especially important for unmarried partners, who may not automatically receive the spouse's pension
- →How the lump sum should be divided if there are multiple potential beneficiaries
- →Special circumstances (e.g., a dependent adult child, an estranged spouse from whom the member is separated but not divorced)
Frequently Asked Questions
What is a defined benefit pension and how is it different from a defined contribution pension?
A defined benefit (DB) pension pays a guaranteed income in retirement based on a formula — typically final salary multiplied by years of service, divided by an 'accrual rate' (e.g. 1/60th or 1/80th per year of service). A career average revalued earnings (CARE) pension is a modern variant that averages salary over the career rather than using final salary. In a DB scheme, the employer bears the investment risk — your pension is guaranteed regardless of how the scheme's investments perform. By contrast, a defined contribution (DC) pension builds up a 'pot' of money (your contributions + employer contributions + investment growth) that you use to provide retirement income. DC pensions can be nominated — the pot passes to nominated beneficiaries on death. DB pensions cannot be 'nominated' in the same way — there is no pot; the scheme pays benefits according to the scheme rules.
What happens to a defined benefit pension when the member dies in service (before retirement)?
Death in service under a DB scheme typically provides: (1) A lump sum death benefit — usually 2–4 times final salary, held in a discretionary trust by the pension trustees; this lump sum is generally not in the estate for IHT and probate purposes; (2) A spouse's/civil partner's pension — usually 50% of the pension the member would have received if they had retired at the date of death (calculated on projected pensionable service to normal retirement date under some schemes, or actual service to date of death under others); (3) A children's pension — typically a fraction of the member's projected pension, payable until the children reach 18 (or 23 if in full-time education); (4) A dependant's pension — if the member was supporting a financial dependant who is not a spouse, some schemes provide a dependant's pension. The exact benefits depend on the scheme rules — members should request a copy of their scheme booklet from HR or the pension trustees.
What happens to a DB pension when the member has left the employer but not yet retired (deferred member)?
A deferred member has left employment but has not yet started drawing their pension. Death benefits for deferred members are typically less generous than for active (in-service) members: (1) A lump sum — some schemes pay a return of contributions or a smaller lump sum (e.g. 5x the deferred pension); some pay nothing; (2) A deferred spouse's pension — typically 50% of the deferred pension the member would have received at normal retirement age, revalued in line with statutory minimum requirements (CPI/3% depending on accrual date). The details vary significantly by scheme. Deferred members should check their scheme booklet or write to the scheme administrator to find out their exact death benefit entitlement. The expression of wishes form filled in when employed may no longer be on file — submit an updated one.
What happens to a DB pension if the member dies after they have started taking it (in payment)?
Once a pension is in payment (the member has retired and started drawing their pension), death benefits typically include: (1) Spouse's/civil partner's pension — usually 50% of the member's gross pension, paid for the spouse's remaining lifetime; (2) Pension guarantee period — some schemes include a guarantee that the full pension will be paid for a minimum period (commonly 5 or 10 years); if the member dies within the guarantee period, the balance of the guaranteed payments is paid as a lump sum to the estate or nominated persons; (3) Children's and dependants' pension — some schemes pay a children's pension until age 18/23 and/or a dependant's pension. The spouse's pension is paid automatically based on the scheme's records of marital status — unlike DC pensions, a nominated beneficiary form does not typically determine who receives the spouse's pension (it must be a spouse/civil partner/qualifying cohabiting partner under the scheme rules).
Do the April 2027 pension IHT changes affect defined benefit pensions?
The April 2027 pension IHT changes bring unspent DC pension pots into the scope of IHT. However, these changes have limited direct impact on DB pension death benefits for the following reasons: (1) There is no 'pot' to bring into the estate — DB schemes pay benefits in the form of pensions and sometimes lump sums calculated by formula; there is no accumulated pot that could be added to the estate for IHT; (2) Lump sum death-in-service benefits from DB schemes are typically held in discretionary trusts and will likely continue to be outside the estate; (3) Spouse's and dependants' pensions are exempt pension-income benefits — they continue to be paid outside the estate. Some DB scheme death-in-service lump sums that are treated as 'relevant lump sum death benefits' under the new pension IHT rules may be caught, but the detailed mechanics are complex and scheme-specific. Scheme members and their dependants should take specialist pension advice on how the April 2027 changes interact with their specific scheme benefits.
Your Pension & Your Will Work Together — Sort Both
Your DB pension expression of wishes and your will cover different assets. Make sure both are up to date. The WillSafe kit covers the will side — from £19.97 for England and Wales.