What Happens to Your Pension When You Die UK (2026)
Most people assume their pension will pass to their family through their will. It usually doesn't. Pensions sit outside your estate — controlled by a nomination form, not your will. And from April 2027, the rules are changing in a way that affects millions of savers. Here is everything you need to know.
Important: rule change from 6 April 2027
From 6 April 2027, unused pension pots and most death benefits will be brought into scope for inheritance tax for the first time. If you have a significant pension, review your estate planning before this date. This guide explains the current rules (2026/27) and flags where the 2027 change applies.
Your pension does not usually pass through your will
This surprises many people. Unlike your bank accounts, property and investments — which form your estate and are distributed according to your will — most private pensions are held in a trust and sit outside your estate. They are not dealt with by your executor and do not go through probate.
Instead, when you die your pension scheme trustees decide who receives the fund. They are guided (but not legally bound) by an expression of wishes form — also called a nomination of beneficiary form — that you complete with your pension provider. The trustees almost always follow the nomination, but they have discretion precisely so the payment falls outside your estate for inheritance tax purposes.
This matters enormously. It means:
- Your will cannot override your pension nomination form
- If your nomination form names an ex-spouse, they may receive your pension even if your will says otherwise
- If you have no nomination form, the trustees decide — which may not be who you intended
- Beneficiaries can receive the pension quickly, bypassing the probate process entirely
Defined contribution vs defined benefit pensions
The rules differ depending on what type of pension you have.
Defined contribution (DC) pensions
These are the most common type for people who have worked in the private sector since the 1990s. You build up a pot of money — including employer contributions — and that pot can be passed to nominated beneficiaries on your death. Beneficiaries can take it as a lump sum or move it into a drawdown arrangement to take as income.
Defined benefit (DB) / final salary pensions
These are more common in the public sector and older employer schemes. There is usually no lump-sum pot. Instead, the scheme typically pays a reduced pension income to a surviving spouse or civil partner (commonly 50% of your pension). Some DB schemes also pay a death-in-service lump sum if you die before retirement. Check your individual scheme booklet — every DB scheme is different.
State pension
The State Pension generally stops on death. In certain circumstances, a surviving spouse or civil partner can inherit some State Pension — based on National Insurance contribution records — but the amount is limited. This is separate from any private pensions you hold.
Tax on pension death benefits
The tax treatment of pension death benefits depends on your age at the point of death.
| Age at death | Income tax on payout | Notes |
|---|---|---|
| Under 75 | None (tax-free) | Subject to the Lump Sum and Death Benefit Allowance (£1,073,100). Funds must be designated within 2 years of death. |
| 75 or over | Taxed at beneficiary's marginal income tax rate | Added to the beneficiary's income for the year — the same rate as their salary. Careful timing of withdrawals can reduce the tax burden. |
Inheritance tax (current rules): Under current rules for 2026/27, the pension pot generally falls outside your estate for IHT purposes — so no 40% inheritance tax charge applies to the fund itself. This makes a pension one of the most tax-efficient ways to pass wealth to the next generation.
The April 2027 IHT change — what is changing
From 6 April 2027, the government will bring unused DC pension pots and most lump-sum death benefits into the scope of inheritance tax. Under the new rules:
- Your pension will be added to the value of your estate when calculating IHT
- If your combined estate (property + investments + pension) exceeds the nil-rate band (£325,000 + any residence nil-rate band), the excess will be charged at 40%
- The pension trustees and the estate executor will need to co-ordinate the IHT calculation and payment
This is a significant change for people who have saved into large DC pensions as part of estate planning. Strategies that worked under current rules — such as spending other assets first and leaving the pension pot untouched — will need to be reviewed. If your total estate including your pension exceeds the IHT thresholds, speak to a financial planner before April 2027.
For more on how IHT thresholds work, see our IHT threshold guide.
How pension death benefits are paid — the process
Death notified to scheme
Pension provider is notified — usually by the executor or next of kin. Schemes often require a death certificate.
Expression of wishes reviewed
Trustees review the nomination form and any other supporting information about your circumstances.
Trustees decide
Trustees exercise their discretion — in practice almost always following the nomination form. They may contact nominated beneficiaries.
Payment made
Lump sum paid (or drawdown fund set up) for the beneficiary. Tax treatment depends on your age at death and the beneficiary's circumstances.
The most important thing you can do today: update your nomination form
If you do only one thing after reading this article, log in to your pension provider and check (or complete) your expression of wishes form. Here is when you must update it:
- You get married or enter a civil partnership
- You divorce or separate
- You have children
- A nominated beneficiary dies
- Your relationship with a nominated beneficiary changes significantly
- You take out a new pension (each scheme needs its own form)
If you have multiple pensions from different employers, each one needs a separate nomination form. This is one of the most overlooked aspects of estate planning — and one of the simplest to fix.
Pensions and life insurance — not the same thing
Life insurance policies also typically fall outside your estate if written in trust — but the nomination and trust mechanics work differently to pensions. A life insurance policy written in trust pays directly to the trustees of the policy (who distribute to your nominated beneficiaries), bypassing probate and IHT in the same way as a pension.
If your life insurance policy is not written in trust, the payout goes into your estate, where it is subject to both probate and IHT. This is a common and costly oversight. Our Pension & Life Insurance Beneficiary Guide covers both in detail — including how to put a policy in trust, what to include in nominations, and how to structure beneficiary arrangements efficiently.
Does your will affect your pension at all?
Generally, no — your will does not control your pension. However, there are two situations where the two interact:
- If you have no nomination form and no living dependants, some schemes will pay the death benefit into your estate as a last resort — in which case your will (or intestacy rules if you have no will) applies. This is the worst outcome: the payment goes through probate, potentially becomes subject to IHT, and delays payment to your family.
- Lump sum to estate by choice: Some people intentionally nominate "my estate" as the recipient — usually when they want the pension to fund a specific bequest in the will. This is rarely tax-efficient and should only be done on specialist advice.
The clean approach is: keep your pension nomination form up to date, separate from — but consistent with — your will.
Frequently asked questions
Does your pension get paid to your estate when you die?
Usually not. Most private pensions (defined contribution schemes) fall outside your estate. The pension trustees have discretion over who receives the fund, guided by your expression of wishes / nomination form. Because pensions sit outside your estate, they are not controlled by your will and do not go through probate — which is both a tax advantage and a reason to keep your nomination form up to date.
Who gets your pension when you die?
Whoever you have nominated on your pension's expression of wishes form. The pension scheme trustees read your nomination form and use their discretion to pay out. They are not legally bound by the form — but in practice they almost always follow it. If you have not completed a nomination form, the trustees decide who receives the money, which may not be who you intended.
Is a pension payout subject to inheritance tax?
Currently (2026/27), most private pension pots fall outside your estate for inheritance tax purposes — so no IHT is payable on them at death. This is one of the most valuable features of a pension as a wealth-transfer vehicle. However, this will change from 6 April 2027, when unused pension funds and certain death benefits will be brought into scope for IHT. If you have a significant pension pot, you should review your estate planning before that date.
Is the pension lump sum taxable?
If you die before age 75, your beneficiaries can usually receive the pension fund free of income tax — whether as a lump sum or drawdown. If you die at or after age 75, the fund is paid to beneficiaries and taxed at their marginal rate of income tax (not as a separate tax — it is added to their income for the year). The Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100 caps tax-free death lump sums across all your pensions.
Can I leave my pension to my children?
Yes. You can nominate children (including adult children) as beneficiaries on your pension expression of wishes form. If the pension pays out before your death at age 75, they receive it free of income tax. After age 75, they pay income tax at their marginal rate. From April 2027, your pension pot will also be counted in your estate for IHT purposes — which may affect planning for larger estates.
What happens to a final salary (defined benefit) pension when you die?
Defined benefit (DB) / final salary pensions work differently. In most cases, a spouse or civil partner receives a reduced pension income (often 50% of your pension). There is usually no lump-sum pot to pass on — instead the scheme pays a dependant's pension to a surviving partner. Some schemes also pay a lump sum (e.g. a multiple of your salary) if you die in service. Check your scheme rules, as each DB scheme is different.
What is an expression of wishes form?
An expression of wishes (also called a nomination of beneficiary form) tells your pension provider who you would like to receive any lump sum or drawdown pot on your death. The trustees have legal discretion and are not bound by the form, but they almost always follow it. You should complete one for every pension you hold and review it after major life events — marriage, divorce, children, death of a nominated beneficiary.
Does a pension pass through probate?
No. Because most private pensions sit outside your estate, they do not pass through your will and do not require a Grant of Probate to release the funds. This means your beneficiaries can often receive pension death benefits much faster than estate assets, which may be tied up in probate for months.
Get the Pension & Life Insurance Beneficiary Guide
Our WS-045 Pension & Life Insurance Beneficiary Guide (£25) walks you through completing nomination forms, writing beneficiary arrangements for life insurance policies, and structuring both for maximum tax efficiency — in plain English, without the jargon.