What Happens to Your Pension When You Die UK (2026): Death Benefits, Tax & the April 2027 IHT Change

Why pensions don't pass through your will

Most UK personal pensions, workplace pensions, and SIPPs are held in a discretionary trust managed by the pension trustees. They are not part of your legal estate — which means they do not pass through your will, are not subject to probate, and (until April 2027) are not subject to IHT.

This is why the pension is sometimes called the most tax-efficient way to pass wealth to the next generation. A £300,000 pension pot left directly to children (pre-2027) is entirely IHT-free and — if you die before 75 — income-tax free too. The same £300,000 in a bank account would be subject to 40% IHT on the amount above available nil-rate bands.

But this benefit depends entirely on one thing: keeping your expression of wish form current.

The expression of wish form: what it is and why it matters

An expression of wish form (sometimes called a nomination of beneficiaries form) tells the pension trustees who you would like to receive the death benefits. It is:

• Not legally binding — trustees have discretion to pay to anyone, but almost always follow it
• Kept outside the will — which is precisely why it avoids IHT and probate delays
• Updatable at any time — log in to your pension provider's portal or call them
• Separate for each pension — if you have multiple pensions, each needs its own form

Update your expression of wish form after every major life event: marriage, divorce, birth of a child, death of a named beneficiary, separation.

Tax on pension death benefits: the rules at a glance

DC = defined contribution (personal pension, SIPP, workplace pot). DB = defined benefit (final salary or career average). NRBs = nil-rate bands (standard £325,000 + RNRB £175,000 where eligible).

The April 2027 IHT change: what it means for your pension

The key planning actions before April 2027 are:

• Review your overall estate value including pensions. If the combined estate (property + savings + pensions) will exceed your nil-rate bands, specialist IHT planning is now more urgent.
• Consider drawdown income planning. Spending pension income during retirement rather than drawing down other assets reduces the pot subject to the new IHT rules.
• Review life insurance in trust. A death-in-service or term life policy written in trust remains outside the estate regardless of the 2027 pension changes — and pays immediately without waiting for probate or pension administration.
• Update your will. The pension can no longer be relied upon as a tax-free legacy vehicle after 2027 — your will needs to reflect your updated wishes for the taxable estate including any pension.

Defined contribution vs defined benefit: who can inherit

Frequently asked questions

Does a pension pass through your will in the UK?

No. Most UK pensions are held in a discretionary trust by the pension trustees and do not form part of your legal estate. They do not pass through your will and are not subject to probate. Instead, they are paid to beneficiaries you nominate on an 'expression of wish' form — though trustees retain discretion and are not legally bound by it. Because pensions bypass the will, they are also currently exempt from IHT (until April 2027). Keeping your expression of wish form current is one of the most important and most overlooked parts of estate planning.

What is an expression of wish form?

An expression of wish form (also called a nomination of beneficiaries form) is a document you complete for your pension provider stating who you would like to receive your pension death benefits. It is not legally binding — pension trustees have discretion to pay to anyone they choose — but in practice trustees almost always follow it. You can nominate anyone: a spouse, children, siblings, friends, a charity, or a combination with specified percentages. Update it whenever your circumstances change (marriage, divorce, new children, death of a nominated beneficiary).

Is pension inheritance tax free in the UK?

Until April 2027, most pension death benefits fall outside the estate for IHT purposes and are entirely IHT-free. From April 2027, the government will bring unused pension pots and pension death benefits into the taxable estate for IHT. This means pensions will be included in the estate valuation at death and subject to 40% IHT on the amount above available nil-rate bands. For people with large pension pots this could dramatically increase their IHT bill. The rules are still being finalised — HMRC consultations closed in January 2026.

How is pension death benefit taxed in the UK?

Income tax applies to pension death benefits based on the deceased's age. If you die before age 75: defined contribution death benefits paid as a lump sum or flexi-access drawdown are income-tax free for the recipient (within the available lump sum and death benefit allowance). If you die aged 75 or over: all death benefits are taxed as income in the hands of the recipient at their marginal rate when drawn. The age-75 threshold has not changed and will coexist with the new IHT rules from April 2027.

What happens to a defined benefit (final salary) pension when you die?

A defined benefit (final salary or career average) pension can usually only pay death benefits to qualifying dependants: a spouse or civil partner, and children under 23 (or older if in full-time education or disabled). Unlike defined contribution pensions, you cannot nominate friends or adult non-dependent children as beneficiaries. On death before retirement, a lump sum (typically 2–4 times salary) is often payable in addition to a dependant's pension. On death in retirement, the scheme rules determine what — if any — dependant's pension continues.

What happens to unused pension after death under the new 2027 rules?

From April 2027, the pension trustees will need to report the value of any unused defined contribution pension pot at death to HMRC as part of the estate. IHT will be due on the total estate (including pensions) above the available nil-rate bands. The practical process is still being determined by HMRC — it is likely that pension trustees will be required to pay IHT directly to HMRC before releasing death benefits to beneficiaries. People with large pension pots should review their estate planning now, as pensions can no longer be relied upon as a tax-free legacy vehicle after April 2027.

Should I use my pension to pay IHT on my estate?

Before April 2027, pensions are commonly used in estate planning because they are IHT-free. Spending other taxable assets first and preserving the pension pot delays IHT. After April 2027, this strategy loses most of its benefit because pensions will be included in the taxable estate anyway. The most important immediate action is to update your expression of wish form, ensure it reflects your current wishes, and review your overall estate plan in light of the 2027 changes. Specialist tax advice is worthwhile for pension pots above £250,000.

Related guides

• How to Reduce Inheritance Tax UK: 12 Legal Strategies
• Life Insurance in Trust UK: How It Works
• What Is Estate Planning UK? The Five Key Documents
• Inheritance Tax on Property UK: Full Guide