Pension Planning UK 2026/27 — How Much You Need and How to Get There

What Happens to Your Pension When You Die UK — Complete Guide

Who inherits your pension and how much they receive. Death benefits for defined benefit, defined contribution, and state pensions explained.

· · 4 min read

Pension information is based on current UK legislation. Pensions are regulated by the FCA and The Pensions Regulator. This is not financial advice — consider consulting an FCA-regulated financial adviser.

Understanding pension death benefits helps ensure your retirement savings go to the right people.

Types of Pension Death Benefits

Overview by Pension Type

Pension Type What Happens on Death
Defined contribution Can pass entire fund to anyone
Defined benefit Usually 50% to spouse
State pension Generally stops
Annuity Depends on type purchased

Defined Contribution Pensions

Death Before 75

Benefit Details
Full fund Passes to nominees
Tax Completely tax-free
Payment options Lump sum or drawdown
Who can inherit Anyone you name

Death After 75

Benefit Details
Full fund Passes to nominees
Tax Income tax at beneficiary’s rate
Payment options Lump sum or drawdown
Who can inherit Anyone you name

Tax Comparison

Age at Death Beneficiary’s Tax
Under 75 0% (tax-free)
Over 75 20-45% (their marginal rate)

Example: £200,000 Pension Pot

If You Die At Beneficiary Receives
74 £200,000 (tax-free)
76 (they’re basic rate) £160,000 after tax
76 (they’re higher rate) £120,000 after tax

Nomination Forms

Why They Matter

Aspect Details
Separate from will Pension trustees decide
Expression of wish Usually followed
Speed Can pay quickly
Flexibility Change anytime
IHT benefit Outside estate

Who to Nominate

Option Consideration
Spouse/partner Most common
Children If adult
Trust For minor children
Anyone Not restricted
Multiple people Percentage shares

Keeping Updated

Update When Why
Marriage New spouse
Divorce Remove ex
Children born Add them
Bereavement Remove deceased
Annually Review anyway

Defined Benefit Pensions

Typical Death Benefits

Benefit Amount
Spouse’s pension 50% of your pension
Children’s pension 25-50% (age-limited)
Death in service lump sum 2-4x salary
Commutation Rarely available

Spouse’s Pension

Factor Details
Percentage Usually 50%, some 66.67%
Calculation Of your pension at death
Lifetime For their life
Indexed Usually increases

Children’s Pension

Factor Details
Payable to Dependent children
Age limit Usually 18 (23 if student)
Amount 25-50% typically
Per child Or shared

Death Before Retirement

Benefit Typical
Lump sum 2-4x salary
Partners pension Varies by scheme
Based on Prospective service

Death After Retirement

Benefit Typical
Spouse’s pension 50% of your pension
Any guarantee period E.g., 5-year guarantee
Lump sum If within guarantee

State Pension

What Survives

Element What Happens
Basic state pension Stops
New state pension Stops
Additional pension (pre-2016) May be inherited
Protected payment May pass to spouse

Inherited State Pension

If Deceased Had Spouse May Inherit
SERPS (pre-2002) Up to 50%
S2P (2002-2016) Some amount
Protected payment Possibly

Bereavement Support Payment

Element Details
Who Surviving spouse/civil partner
First payment £3,500
Monthly payment £350 for 18 months
Total £9,800
Requirement Under State Pension age

Annuities

Death and Annuities

Annuity Type On Death
Single life Payments stop
Joint life Continues to spouse
Guaranteed period Payments for remaining period
Value protected Remainder paid out

Options at Purchase

Feature Effect on Income Death Benefit
Single life Highest None
Joint life (50%) Lower 50% to spouse
10-year guarantee Lower Payments continue
Value protection Lower Return of fund

Already Have Annuity?

Check Why
Your contract What you selected
Spouse percentage If joint life
Guarantee period How long left
Value protection If included

Tax Efficiency

Pensions vs Other Assets

Asset IHT Income Tax
Pension (under 75) None None
Pension (over 75) None Beneficiary’s rate
Bank savings 40% None
ISA 40% None
Property 40% None

Strategy: Spend Other Assets First

Approach Benefit
Spend savings/ISAs They’re in IHT estate
Preserve pension Tax-efficient inheritance
Live off taxable income Let pension grow

Practical Steps

What to Do Now

Action Details
1. Find all pensions Including old ones
2. Complete nominations For each pension
3. Understand benefits Request benefit statements
4. Keep records For family
5. Review regularly Update after changes

Finding Old Pensions

Method How
Pension Tracing Service Free government service
Old employers Contact HR/pensions
Old paperwork Check files
Previous addresses May have post

Your Family Should Know

Important Information

They Need Why
Which pensions To claim from
Scheme contacts For notification
Nomination forms To check they’re beneficiaries
Death certificates Multiple copies needed

Documentation Location

Document Keep
Pension statements Together
Nomination forms Copies
Contact details Each scheme
Login info If online access

Claiming After Death

Process

Step Action
1 Notify pension provider
2 Provide death certificate
3 Trustees review nomination
4 Decision made
5 Payment to beneficiaries
6 Choose lump sum or drawdown

Timeline

Stage Typical Time
Initial notification Immediate
Processing 2-6 weeks
Payout 1-3 months
Complex cases Longer

Summary

Pension Type Main Benefit Tax (Under 75) Tax (Over 75)
DC pension Full fund Tax-free Income tax
DB pension 50% to spouse Usually tax-free Income tax
Annuity Per contract N/A Varies
State pension Stops N/A N/A
Key Actions Priority
Complete nominations Critical
Keep updated Important
Tell family Essential
Consider tax position Beneficial

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Sources

  1. GOV.UK — Pension and retirement
  2. MoneyHelper — Pensions guidance