What happens to a pension when someone dies in the UK

What happens to a defined contribution pension when someone dies?

A defined contribution pot passes to the beneficiary the member nominated, normally free of income tax if the member died before age 75. Defined contribution pensions include personal pensions, SIPPs, stakeholder pensions and most workplace pensions set up after 2012.

• Death before age 75: free of income tax up to the Lump Sum and Death Benefit Allowance of £1,073,100 across all the deceased's pensions, with anything above that taxed at the beneficiary's marginal rate as a lump sum

• Death at or after age 75: taxed at the beneficiary's marginal income tax rate, as a lump sum or as income

• Claim deadline: 2 years from the date the scheme is told of the death, after which payments are unauthorised and attract tax charges of up to 55% (HMRC)

If the pension member died at 75 or over, the beneficiary pays income tax at their marginal rate on every payment.

Who decides who receives a defined contribution pension?

The pension scheme trustees decide, not the will and not the executor. Most defined contribution pensions sit in a discretionary trust, so the pot does not belong to the deceased at death. The deceased's instruction goes on an expression of wish form, also called a nomination form.

An expression of wish is not binding, and trustees depart from it most often when the form is out of date or the nominee died first. Where no form was filed, trustees usually look to the spouse, civil partner and dependants first.

What happens to a defined benefit pension when someone dies?

A defined benefit pension usually pays a survivor's pension to a spouse or civil partner at 50% to 60% of the member's pension, rather than a fund. Defined benefit schemes, also called final salary or career average schemes, are most common in the public sector and older corporate schemes.

• Death in service: a lump sum of typically 2 to 4 times annual salary, usually tax-free when paid through the scheme trust to a nominated beneficiary

• Survivor's pension: 50% to 60% of the pension the member was receiving or would have received, paid to a spouse, civil partner or qualifying dependant for life

• Children's pension: paid by some schemes to dependent children until a set age, typically 23, or longer if the child is disabled

• Death within 5 years of retirement: a balancing lump sum equal to 5 years' pension payments less what has been paid, often called a pension protection lump sum

Scheme rules decide who counts as a survivor. A spouse or civil partner usually qualifies automatically, an unmarried partner only if the scheme recognises them. Where the member was still employed, check the death in service benefit too. A miners' pension is a defined benefit pension, so a survivor claims under these rules. The Mineworkers' Pension Scheme pays a spouse's pension to a surviving spouse or civil partner if the member left the industry after 6 April 1978. The pension is around two thirds of the member's pension (Mineworkers' Pension Scheme).

What happens to the State Pension after death?

The State Pension stops on the date of death, and the final payment covers the rate up to that date. Report the death with Tell Us Once, which tells the Department for Work and Pensions. What a surviving spouse or civil partner can inherit depends on when the deceased reached State Pension age.

• Reached State Pension age before 6 April 2016: the survivor may inherit some of the deceased's Additional State Pension

• Reached State Pension age on or after 6 April 2016: the survivor may inherit part of a protected payment, which exists only where the deceased built up more than the full new State Pension

• Full new State Pension: £241.30 a week for 2026/27, none of which passes to a survivor

A widower's State Pension and a widow's State Pension follow identical rules. The GOV.UK State Pension inheritance tool gives a personalised answer.

How much is a widow's pension in the UK?

There is no widow's pension in the UK any more. For deaths on or after 6 April 2017, Bereavement Support Payment replaced it, worth up to £9,800 on the higher rate or £4,300 on the standard rate.

• Higher rate: £3,500 lump sum plus £350 a month for 18 months, £9,800 in total, if you were entitled to Child Benefit or pregnant when your partner died

• Standard rate: £2,500 lump sum plus £100 a month for 18 months, £4,300 in total, for everyone else who qualifies

• Claim window: 3 months from the death for the full amount, with 21 months as the final deadline

Our guide to the widow’s pension covers these rates and the older benefits in full.

Who is entitled to a widow's pension?

You can claim Bereavement Support Payment if your husband, wife or civil partner died on or after 6 April 2017 and you were under State Pension age. Your partner must also have paid National Insurance for at least 25 weeks in one tax year, or have died from an accident or disease caused by their work.

Since 9 February 2023, a cohabiting partner can claim too, if they lived with the person who died and were responsible for a child or pregnant. You cannot claim if you were divorced from them. Bereavement Support Payment is tax-free and not means tested.

What happens to an annuity when someone dies?

Most annuities stop on the annuitant's death and pay nothing to anyone else. An annuity is an income-for-life product bought with a pension pot, and the outcome on death depends on the features chosen at purchase.

• Single life annuity: payments stop on death, with nothing passing to anyone else

• Joint life annuity: payments continue to a named dependant for life, usually at a reduced rate, often 50%

• Guaranteed period: payments continue to a beneficiary for the rest of the guaranteed period, often 5 or 10 years from the start

• Value protection: the difference between the purchase price and the amount already paid out goes to beneficiaries as a lump sum

Do you have to pay back a pension overpayment after death?

Yes. Any pension paid for a period after the date of death has to be repaid, whether it came from the State Pension or a private scheme. The money is not the survivor's to keep, even if it was paid into a joint account.

• State Pension overpayment: repaid to the Department for Work and Pensions, which writes with the amount owed

• Private or workplace pension overpayment: repaid to the scheme, which usually sets a date for repayment

The Department for Work and Pensions recovers a State Pension overpayment from the deceased's estate. It writes to whoever is dealing with the estate once probate has been granted, explaining the amount owed and how to pay it. There is no fixed repayment deadline. The estate should not be distributed until the amount owed is confirmed, or the person dealing with it may have to repay it themselves (GOV.UK). Notify each scheme quickly: the longer payments continue, the larger the sum to repay.

How does the April 2027 inheritance tax change affect pensions?

From 6 April 2027, most unused defined contribution pension pots and death benefits will count as part of the estate for inheritance tax. Pensions will no longer sit outside the estate.

• The tax charge: the unused pot is added to the estate and taxed at 40% above the available nil rate band

• The forecast effect: the OBR expects the share of estates paying inheritance tax to rise from around 5% to around 8%

A pot of £500,000 that currently passes outside the calculation will be added to the estate from April 2027. If that pushes the estate over the nil rate band, or over the £2 million taper threshold for the residence nil rate band, the tax position changes sharply.

Income tax rules stay in place, so some beneficiaries pay inheritance tax on the value at death and income tax when they draw the money. Our guide to defined contribution pensions and inheritance tax covers the executor's reporting duties. Take advice before April 2027, because the 7 year rule for inheritance tax means lifetime gifts need years of lead time to fall out of the estate.

What does the executor need to do about a pension?

Find every pension, tell each scheme, then claim within the deadlines. Private pensions sit outside Tell Us Once, so each provider must be contacted separately with a death certificate.

• Step 1, find the pensions: check paperwork, old payslips, provider letters, bank statements and P60s, then use the Pension Tracing Service for anything you cannot trace

• Step 2, notify each provider: most schemes want a death certificate and their own bereavement form

• Step 3, establish the type and options: ask for the expression of wish on file, the fund value at death, and the beneficiary options

• Step 4, claim within 2 years: the 2 year rule applies to defined contribution death benefits, and defined benefit lump sums often carry the same limit

• Step 5, deal with inheritance tax: from 6 April 2027 the unused pot counts towards the estate, and administrators must provide a valuation within 28 days

An out of date expression of wish can point a pension at a former partner. Families typically find two or three pensions when the person held four or five.