What Happens to Your Pension When You Die Over 75? Inheritance & Tax Rules

Wondering what happens to your pension after you die over 75? Learn how pensions are inherited, who can claim them and how tax rules apply to beneficiaries.

Planning for the future includes understanding what happens to your pension after you pass away, especially if you live beyond 75. While pensions can be inherited by family members or other beneficiaries, the tax treatment and payout options change significantly once you reach 75.

The way your pension is handled after death depends on several factors, including:

  • The type of pension you have (State Pension, workplace pension, or private pension).

  • Who you’ve nominated as a beneficiary.

  • Whether you’ve already started taking pension withdrawals.

  • The tax rules for pensions inherited after age 75.

This guide explains who can inherit your pension, how it is taxed, and what steps to take to ensure your loved ones receive the benefits you’ve built up.

What Happens to Different Types of Pensions When You Die Over 75?

1. State Pension – Limited Inheritance

The UK State Pension does not pass on to beneficiaries in the same way as private pensions. However, a surviving spouse or civil partner may inherit some benefits.

  • If your spouse or civil partner reached State Pension age before 6 April 2016, they may inherit extra pension payments from the old Basic State Pension system.

  • If you paid into the Additional State Pension (SERPS or S2P), part of it may be transferred to your spouse.

  • If you reached State Pension age after 6 April 2016, your spouse 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 value depends on contributions and investment growth.

Unlike the State Pension, these pensions can be inherited, but tax rules differ depending on whether you die before or after age 75.

  • If you die before age 75 → The pension can usually be inherited tax-free.

  • If you die after age 75 → The pension can still be inherited, but withdrawals will be taxed at the recipient’s income tax rate.

Your beneficiaries will not pay inheritance tax (IHT) on the pension, but they will pay income tax on any withdrawals.

If you haven't yet accessed your pension, the remaining pension pot can be passed on to your nominated beneficiary. They can choose to receive it as:

  • A lump sum (taxed as income).

  • An inherited pension (drawdown option, taxed on withdrawals).

  • An annuity (provides regular payments, but taxable).

To ensure your pension is passed on smoothly, it’s important to nominate a beneficiary 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 retirement income based on salary and years of service.

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

  • A spouse or civil partner may receive 50% to 66% of the deceased’s 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 pension provider to understand whether survivor benefits apply and how much would be passed on.

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 or guaranteed period option ensures payments continue after your death.

Who Can Inherit My Pension After I Die Over 75?

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

1. Spouse or Civil Partner                   

  • Most pension schemes automatically provide survivor benefits to a spouse or civil partner.

  • Defined Contribution pensions allow spouses to inherit the full pension pot, but withdrawals will be taxed as income.

2. Unmarried Partner

  • Some private pensions allow long-term partners to inherit funds, but they must be nominated as a beneficiary.

  • State Pension benefits cannot be inherited by unmarried partners.

3. Children & Dependents

  • Some pensions provide survivor benefits for dependent children under 18 (or under 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.

How Are Pensions Taxed When You Die Over 75?

The biggest difference when you die after age 75 is that your pension is no longer tax-free for beneficiaries.

Before Age 75

  • Most pension pots can be inherited tax-free, as long as the pension provider is notified within two years.

After Age 75

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

  • If taken as a lump sum, it is added to the recipient’s 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 Ensure Your Pension Goes to the Right Person

To ensure your pension benefits go to the right person, take these steps:

  1. Check Your Pension Scheme’s Rules

    • Contact your pension provider to understand inheritance options.

  2. Nominate Beneficiaries

    • In Defined Contribution pensions, fill out a nomination or expression of wish form.

  3. Consider a Joint-Life Annuity

    • If buying an annuity, choose a joint-life or guaranteed period option.

  4. Keep Your Pension Details Up to Date

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

Final Thoughts: What Happens to Your Pension When You Die Over 75?

  • Defined Contribution pensions can be inherited, but withdrawals are taxed as income.

  • Defined Benefit pensions may provide a reduced survivor benefit to a spouse or dependent.

  • Annuities only pass on benefits if a joint-life or guaranteed option was chosen.

  • State Pensions generally do not pass on, except for some limited benefits to spouses.

Updating your nominated beneficiaries ensures your pension is passed on efficiently and tax-effectively.