What Happens to My Pension When I Die? Inheritance Rules Explained

Wondering what happens to your pension when you die? Learn about pension inheritance, survivor benefits, and how to ensure your loved ones receive your pension.

Pensions are one of the biggest financial assets most people have, but many don’t think about what happens to their pension after they pass away. Whether your pension is passed on to a spouse, partner, children, or other beneficiaries depends on the type of pension you have, who you’ve nominated, and your age at the time of death.

Some pensions provide a tax-free lump sum, while others continue to pay an income to a surviving spouse or dependent. This guide explains what happens to different types of pensions when you die and how to make sure your loved ones receive what they’re entitled to.

The amount, rules, and tax treatment of an inherited pension depend on several factors, including the type of pension the deceased had, their age at the time of death, and whether they had nominated a beneficiary. Understanding how inherited pensions work can help you navigate the financial implications of losing a loved one and ensure you receive any benefits you may be entitled to.

What Happens to Different Types of Pensions When You Die?

1. State Pension – Limited Inheritance

The UK State Pension does not automatically pass on to anyone after death. However, in some cases, a surviving spouse or civil partner may be able to inherit additional benefits.

  • If you reached State Pension age before 6 April 2016, your spouse may inherit part of your Basic State Pension.

  • If you paid into the Additional State Pension (SERPS or S2P), your spouse may inherit a portion of this.

  • If you reached State Pension age after 6 April 2016, your partner may be able to inherit extra pension payments if they don’t already qualify for the full new State Pension.

Unmarried partners and children cannot inherit State Pension benefits.

2. Defined Contribution Pensions (Private & Workplace Pensions)

A Defined Contribution (DC) pension is a personal or workplace pension where the amount depends on contributions and investment growth.

These pensions can be inherited by a nominated beneficiary, such as a spouse, child, partner, or even a friend.

  • If you die before age 75, your pension can usually be passed on tax-free, either as a lump sum or an inherited pension.

  • If you die after age 75, your beneficiary will inherit the pension, but withdrawals will be taxed as income.

To make sure your pension goes to the right person, update your beneficiary details with your pension provider. If no beneficiary is named, the pension provider may decide who receives the funds, or they could form part of your estate.

3. Defined Benefit Pensions (Final Salary & Career Average Pensions)

A Defined Benefit (DB) pension (also known as a final salary pension) provides a guaranteed income based on salary and years of service.

These pensions do not usually pass on to children, but some may offer a reduced survivor’s pension to a spouse or dependent.

  • A spouse or civil partner may receive 50% to 66% of the pension income.

  • Some schemes provide benefits for dependent children under 18 (or under 23 if in full-time education).

  • If there is no surviving spouse, some schemes may allow benefits to be passed to a long-term partner, but this is not guaranteed.

If you have a DB pension, check with your provider to see if survivor benefits apply.

4. Annuities – Depends on the Type of Annuity

If you used your pension to buy an annuity, what happens after your death depends on the type of annuity you chose:

  • Single-Life Annuities – Stop paying after you die, meaning nothing is passed on.

  • Joint-Life Annuities – Continue paying a reduced income to a spouse or dependent after your death.

  • Guaranteed Period Annuities – Pay out for a fixed period (e.g., 10 years), so if you die within this period, payments may continue to a beneficiary.

If you’re buying an annuity, choosing a joint-life option ensures your spouse or family still receives benefits after your death.

Who Can Inherit My Pension?

The following people may be able to inherit your pension depending on the scheme’s rules:

1. Spouse or Civil Partner                   

  • Most pension schemes provide automatic benefits to a surviving spouse.

  • In Defined Contribution schemes, the spouse can inherit the full pension pot tax-free (if the holder died before 75).

2. Unmarried Partner

  • Some workplace and private pensions allow long-term partners to inherit.

  • State Pension benefits cannot be inherited by unmarried partners.

3. Children & Dependents

  • Some Defined Benefit pensions provide a survivor’s pension for dependent children under 18 (or 23 if in education).

  • If a Defined Contribution pension is inherited, it may be placed into a trust for children under 18 until they reach adulthood.

4. Other Nominated Beneficiaries

  • Defined Contribution pensions allow you to nominate anyone (a friend, sibling, or charity) to receive your pension.

  • If no beneficiary is nominated, the pension provider may decide where the money goes.

Are Inherited Pensions Taxed?

The tax treatment of an inherited pension depends on your age at death and the type of pension.

If You Die Before Age 75

  • Most Defined Contribution pensions can be inherited tax-free, whether taken as a lump sum or ongoing pension payments.

  • The beneficiary must usually claim the pension within two years to qualify for tax-free status.

If You Die After Age 75

  • The inherited pension is taxed at the beneficiary’s normal income tax rate.

  • If taken as a lump sum, it will be added to their taxable income, potentially pushing them into a higher tax bracket.

State Pensions cannot be inherited tax-free—any additional payments to a surviving spouse are taxed as normal pension income.

How to Make Sure Your Pension Goes to the Right Person

To ensure your pension is passed on according to your wishes, follow these steps:

  1. Check Your Pension Scheme’s Inheritance Rules

    • Contact your pension provider to understand what happens to your pension when you die.

  2. Nominate Beneficiaries

    • In Defined Contribution schemes, fill out a nomination or expression of wish form to specify who should inherit your pension.

  3. Consider a Joint-Life Annuity

    • If buying an annuity, choosing a joint-life or guaranteed period option ensures payments continue after your death.

  4. Keep Your Pension Details Up to Date

    • Review your pension nominations every few years, especially after major life events like marriage, divorce, or having children.

Final Thoughts: What Happens to Your Pension When You Die?

  • State Pensions generally do not pass to children, but spouses may inherit extra payments.

  • Defined Contribution pensions can be inherited tax-free if you die before 75, but taxable if you die later.

  • Defined Benefit pensions often provide reduced survivor benefits for spouses or dependents.

  • Annuities can continue paying after death, but only if you chose the right type.

If you want to make sure your pension benefits go to the right person, update your nominated beneficiaries and check with your pension provider to understand their rules.

Planning ahead can give you peace of mind that your loved ones will be financially secure after you’re gone.