Pensions After Death UK

Pensions are often one of the most valuable assets someone leaves behind. What happens to a pension after death depends on the type of pension and who is named as the beneficiary.

State pension

The state pension stops when someone dies. You cannot inherit someone's state pension directly, though a surviving spouse or civil partner may be able to inherit some of their National Insurance record to boost their own state pension entitlement.

Workplace pensions: Defined contribution

Defined contribution pensions (where you build up a pot of money) are usually held in trust. They pass to whoever the deceased nominated, outside of the estate. This means they typically avoid inheritance tax.

If the deceased was under 75 when they died, the beneficiary can usually take the pension tax-free. If they were 75 or over, the beneficiary pays income tax on withdrawals.

Workplace pensions: Defined benefit

Defined benefit (final salary) pensions work differently. Many provide a spouse's or dependant's pension – typically 50% of the member's pension for the rest of the spouse's life. Check with the pension scheme for exact rules.

Annuities

If the deceased bought an annuity, what happens depends on the type. Single life annuities die with the holder – payments stop. Joint annuities continue paying the surviving partner. Guaranteed period annuities pay out for the rest of the guarantee even after death.

The nomination form

Pension providers rely on the nomination form to decide who receives the pension on death. Keeping this up to date is crucial – divorced partners can still inherit if the form was never changed.