When someone dies, what happens to their pension depends on the type of pension they have and their age at death.
Understanding the basic rules can help clarify what usually happens to pension benefits and how they are typically passed on.
In the UK, pension death benefits are governed by specific rules, and the tax treatment often depends on whether death occurs before or after age 75.
Defined contribution pensions
For defined contribution pensions — such as personal pensions, workplace pensions, and SIPPs — any money remaining in the pension does not usually disappear when someone dies.
Instead, it can often be:
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passed on to beneficiaries
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kept within a pension wrapper
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withdrawn by beneficiaries over time
The importance of age 75
A key distinction is whether death occurs before or after age 75.
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Before age 75:
Pension benefits can usually be passed on tax-free to beneficiaries. -
After age 75:
Withdrawals made by beneficiaries are usually taxed as income at their own marginal tax rate.
Who receives the pension?
Pension providers normally pay death benefits at their discretion, based on:
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nomination forms
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expressions of wishes
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scheme rules
This is why keeping beneficiary nominations up to date is important.
Defined benefit pensions
Defined benefit (final salary) pensions work differently.
They may:
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pay a survivor’s pension
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provide a lump sum on death
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stop entirely after certain payments
The exact benefits depend on the scheme’s rules.
What people usually consider next
After understanding what happens to a pension on death, people often go on to consider:
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beneficiary nominations
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how pensions fit with other estate assets
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potential tax implications for beneficiaries
A final note
This article explains the general rules around pensions on death, not how your own pension will be treated.
If understanding these rules raises questions about your wider situation, some people find it helpful to think things through before advice or action. Evoa exists for that purpose — before advice and before action.
👉 https://www.thewealth.coach/evoa
Author
Written by Nic Round
Chartered Financial Planner & Chartered Wealth Manager