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.
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:
passed on to beneficiaries
kept within a pension wrapper
withdrawn by beneficiaries over time
A key distinction is whether death occurs before or after age 75.
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.
Pension providers normally pay death benefits at their discretion, based on:
nomination forms
expressions of wishes
scheme rules
This is why keeping beneficiary nominations up to date is important.
Defined benefit (final salary) pensions work differently.
They may:
pay a survivor’s pension
provide a lump sum on death
stop entirely after certain payments
The exact benefits depend on the scheme’s rules.
After understanding what happens to a pension on death, people often go on to consider:
beneficiary nominations
how pensions fit with other estate assets
potential tax implications for beneficiaries
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