What Is an Inherited Pension? Rules and Who Can Claim

Wondering what happens to a pension when someone dies? Learn how inherited pensions work, who can claim them, and what tax rules apply.

When someone passes away, their pension doesn’t always disappear with them. In many cases, a spouse, partner, or dependent can inherit part or all of the pension. This is known as an inherited pension.

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.

How Do Inherited Pensions Work?

When someone with a pension dies, the pension provider will assess whether the pension has any survivor benefits. These may be paid as:

  • A lump sum (one-off payment).

  • A regular income (ongoing pension payments).

  • A combination of both.

The rules depend on whether the pension was a State Pension, workplace pension, or private pension.

What Happens to Different Types of Pensions After Death?

1. State Pension          

The State Pension is not automatically inherited, but there are certain circumstances where a spouse or civil partner may claim extra pension benefits.

  • If the deceased reached State Pension age before 6 April 2016, their spouse may be able to inherit extra payments from the old Basic State Pension system.

  • If the deceased paid Additional State Pension (SERPS or S2P), a percentage may be transferred to their spouse.

  • If the deceased reached State Pension age after 6 April 2016, their spouse may inherit extra pension 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 (Personal & Workplace Pensions)

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

  • If the person dies before age 75, their pension can usually be inherited tax-free as a lump sum or ongoing pension income, provided the pension provider is notified within two years.

  • If they die after age 75, the pension can still be inherited, but any withdrawals will be taxed as income at the recipient’s marginal tax rate.

  • The pension pot can be passed on to any nominated beneficiary, including a spouse, partner, children, or other named individuals.

Some pensions allow a drawdown option, meaning the beneficiary can withdraw the money gradually rather than taking it all at once.

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

A Defined Benefit (DB) pension provides a guaranteed income based on salary and years of service. These pensions usually cannot be inherited in full, but some provide a reduced survivor’s pension to a spouse or dependent.

  • Spouses & Civil Partners – Typically receive 50% to 66% of the deceased’s pension income.

  • Dependent Children – Some schemes provide payments to children under 18 (or under 23 if in full-time education).

  • Unmarried Partners – Some schemes allow for payments to a long-term partner, but this is not guaranteed.

If no survivor benefits apply, the pension stops upon the pension holder’s death.

4. Annuities (Purchased Pension Income Products)

If the deceased had used their pension pot to buy an annuity, whether or not it can be inherited depends on the type of annuity they chose.

  • Single-Life Annuities – Payments stop when the annuity holder dies, with nothing left for beneficiaries.

  • Joint-Life Annuities – Continue paying a reduced income to a spouse or partner after the original holder dies.

  • Guaranteed Period Annuities – Pay out for a fixed period (e.g., 10 years), meaning payments may continue to a beneficiary if the pension holder dies within that period.

Who Can Inherit a Pension?

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

Spouse or Civil Partner

  • Typically the first in line for inherited pension benefits.

  • May receive a survivor’s pension or lump sum payment.

  • Can inherit State Pension benefits in certain cases.

Unmarried Partner

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

  • State Pension cannot be inherited by an unmarried partner.

Children & Dependents

  • Some pensions provide payments to dependent children under 18 (or under 23 if in education).

  • If the pension is passed down as a lump sum, children can inherit tax-free if the deceased was under 75.

Other Named Beneficiaries

  • Defined Contribution pensions allow flexibility—a pension can be left to anyone, including siblings, friends, or charities, if nominated.

To ensure pension benefits go to the right person, it’s important to keep beneficiary nominations up to date with the pension provider.

Are Inherited Pensions Taxed?

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

If the Pension Holder Died Before 75

  • Most inherited pensions can be taken tax-free, whether as a lump sum or ongoing withdrawals.

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

If the Pension Holder Died After 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 the beneficiary’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 Claim an Inherited Pension

If you believe you are entitled to an inherited pension, follow these steps:

  1. Contact the pension provider – Inform them of the pension holder’s death and request details on survivor benefits.

  2. Provide necessary documents – You will usually need a death certificate, proof of relationship, and beneficiary nomination form (if applicable).

  3. Choose how to receive the pension – Depending on the pension type, you may have options for a lump sum payout, annuity, or pension drawdown.

If you’re unsure about your rights to an inherited pension, seek advice from an independent financial adviser or contact the pension provider directly.

Final Thoughts: What Is an Inherited Pension?

An inherited pension is any pension benefit passed on to a surviving spouse, partner, child, or nominated beneficiary after the pension holder’s death.

  • State Pensions offer limited inheritance rights—only a spouse or civil partner may receive extra benefits.

  • Workplace and private pensions may be passed on tax-free if the holder dies before 75, but taxed as income if they die later.

  • Defined Benefit pensions may provide a reduced income to spouses or dependents but usually cannot be inherited in full.

  • Updating pension nominations regularly ensures your pension goes to the right person.

If you have questions about an inherited pension, check with the pension provider to understand the options available to you.