Pensions 101

What happens to my pension when I die?

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A pension is a financial asset; you should prepare for what happens to these funds after you die and ensure that your trusted beneficiaries inherit your life savings.


The rules for pension transfers after death vary depending on the type of pension you have and the age at which you die.

Here we explain what happens to your pension when you die, based on these types of pensions:

  • the State Pension
  • Defined contribution
  • Defined benefit.

Assign beneficiaries such as your spouse, children and even grandchildren, to inherit your savings after you die.

potential beneficiaries for your pension

What happens to my State Pension when I die?

Your State Pension stops being paid once you die because the State Pension is a Government benefit for you. The State Pension is an entitlement you receive because you’ve made National Insurance contributions (“NICs”) in the past.

  • If you reached State Pension age before the 6th of April 2016, your spouse or civil partner can claim your Additional State Pension, based on your NICs record.
  • If you reached State Pension age on or after the 6th of April 2016, you may inherit an extra payment on top of your ‘new State Pension’.

Your spouse or civil partner needs to be over the State Pension age to claim death benefits from your State Pension. If they haven't reached State Pension age, they might be entitled to Bereavement benefits.

What happens to my workplace pension when I die?

It is possible for your pension to be transferred to relatives once you die, depending on the type of pension pot you saved in and the age you die. Ensure that you have nominated beneficiaries, so that your pension gets passed on to relatives after you die.

I save in a defined benefit pension scheme

The rules regarding beneficiaries receiving a defined benefit pension after death are as follows:

  • If you die before you draw your pension, your beneficiaries will be paid a lump sum 2-4 times your salary, depending on the scheme's regulations.
  • If you die after you draw your pension, your beneficiaries will continue getting a reduced pension.
  • If you die before you turn 75, the inheritance on your pension is tax-free.
  • If you die after you turn 75, any income they receive from your pension will be taxed at their marginal Income Tax rate.
what happens to defined pension benefit scheme

I save in a defined contribution pension scheme

The rules regarding beneficiaries receiving a defined contribution pension after death are as follows:

  • If you die before you turn 75 and haven't drawn your pension yet, your beneficiaries receive your pension tax-free. They can withdraw it as a lump sum, a drawdown or use it to purchase an annuity.
  • If you die before you turn 75 and have started receiving your pension, your beneficiaries inherit your pension based on how you received your pension income.

If you’ve withdrawn a lump sum, the remaining savings will become part of your financial assets and may be subjected to Inheritance tax. If you receive your pension as a drawdown, they can access the remaining savings tax-free. If you receive it as an annuity, usually it cannot be passed on to a beneficiary if you've already started receiving it. However, there are certain annuities that are eligible for pension transfer and others allow you to nominate a certain amount as a “spouse’s pension” - check the conditions around your annuity.

  • If you die after you turn 75, your beneficiaries pay tax on any income they receive from your pension savings, at their marginal tax rate.

What happens to my private pension when I die?

The rules explained above on workplace pensions apply to private pensions too.

Determine if your personal pension is a defined benefit or defined contribution one, to evaluate which rules apply to you and your beneficiaries. Let your pension provider know who your nominees are, in order to receive your pension after your death.

What about Inheritance Tax?

Any asset after your death, such as a property, savings or cash, will be added to your estate for Inheritance Tax purposes. Your pension administrator has the discretion as to who your nominated beneficiaries can be, as each scheme has different rules. Usually a pension can be passed on without being part of your estate and therefore not being subject to Inheritance Tax. In these cases, your pension administrator would need to have discretion regarding who your benefits are paid to.

You should contact your pension provider to know who your pension administrator is because they are usually different entities.

How does discretion work when you nominate a beneficiary?

You can submit an 'expression of wish' form to your pension administrator stating who you wish to inherit your pension. Under discretion rules, the provider has the autonomy to decide who will ultimately inherit your pension savings, but your wishes are always taken into consideration.

Pension schemes ask you to nominate beneficiaries once you join their pension, submitting this 'expression of wish' form.

If you haven't nominated any beneficiaries, your pension provider - using their discretion - will investigate and find a relative to pay the pension to.

questions to ask regarding your pension

Plan ahead

It's important that you plan ahead, whether you're still saving in your pension pot or whether you're retired. Raindrop can help you manage your retirement planning and your pensions by locating your pensions and helping you transfer them into one consolidated pension pot.

Find out today how Raindrop’s pension experts can make pension planning easier for you.  


Please note that the value of your pension can go up as well as down. As with all investments, your capital is at risk. Tax treatment depends on an individual’s circumstances and may be subject to change in the future.

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