If you’ve paid into a pension for several decades, the chances are it’ll be the biggest savings pot you have, so it’s important to understand what will happen to it when you’re no longer around.

As with so many pension questions, unfortunately there’s no simple answer to ‘What happens to my pension when I die?’ as it depends on the type of pension you have, whether you’ve already started taking money out of it, and the age at which you pass away.

Here’s what you need to know. 

Who does my pension go to when I die?

Your wife, husband, civil partner or another nominated beneficiary may receive your pension when you die, but as stated the rules surrounding this and how much they will get depend on the type of pension you have, and your age when you pass away.

However, whoever you wish your pension to pass to, ensure that your workplace or private pension provider knows they are the nominated beneficiary, and complete the necessary forms. This can be done simply in some cases if you’ve online access to your pension account, for example, by clicking on and completing the relevant online section.

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What happens to my pension when I die?

There are two main types of workplace pension, defined contribution and defined benefit pensions. With a defined contribution pension, the amount you end up with at retirement depends on the contributions you and your employer have made, and how the investments in your pension have performed. If you have a private or self-invested personal pension (SIPP), this is effectively a defined contribution pension, however you won’t have benefited from employer contributions. Learn more about how defined contribution pensions work in our guide What is a defined contribution pension?

If you have a defined benefit pension, also known as a final salary pension, this provides a guaranteed income at retirement which is usually based on how many years you’ve belonged to the scheme and a proportion of your final year’s pay. Find out more about defined benefit pensions in our article What is a defined benefit pension?

Inheriting a defined contribution pension

If you have a defined contribution pension and you die before you reach the age of 75, you can usually pass your pension tax-free to a nominated beneficiary. If you have not started taking money from your pension this can be taken as a lump sum payment.

If you were taking an income from your pension using flexible drawdown or flexi-access drawdown at the time, your dependants can receive a tax-free income from the remainder of your pension.

The Government had previously stated that this rule would change, but the Chancellor Jeremy Hunt announced in the Autumn Statement that income will remain tax-free for the beneficiary where the pension scheme member dies before the age of 75.

Jon Greer, head of retirement policy at Quilter, said: “HMRC had previously confirmed in the summer that individuals who died with uncrystallised funds before age 75 and used those to provide beneficiaries with pensions via drawdown or annuity would be taxable. Fortunately, the government has confirmed that such pensions will remain tax-free from April 2024 – a continuation of their current treatment.

“This is good news. If the government had gone ahead with the change to the tax treatment there would have been an incentive to take remaining funds as lump sums which are tax-free up to the available lump sum and death benefit allowance, which will stand at £1,073,100.”

However, if you die when you’re over the age of 75, your pension pot will still transfer tax-free, but your dependants will have to pay income tax at their marginal rate of income tax, on any income they receive from it, in the same way as you would have.

If you have purchased an annuity or income for life – it is likely that this retirement income will stop when you die, although you can buy some specific annuities that continue to provide an income for a dependant. Find out more in our article Annuities Explained

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Inheriting a defined benefit pension

If you die while you’re paying into a defined benefit pension, your scheme will usually pay out a lump sum to your beneficiaries, which may be, for example, two or three times your salary. The scheme may also provide contributions made into the scheme as a lump sum.

Final salary pensions must by law offer benefits to a surviving widow or widower if you die after reaching the scheme’s pension age. The amount they’ll get will vary depending on the company you worked for, but is typically around 50% of what you would have received. It’s important to note that these benefits can get impacted, or be forfeited entirely, if your spouse chooses to remarry after your death.

Many final salary schemes go beyond the minimum and in some cases may even offer payouts to financially dependent children, too. This isn’t the norm however, and usually your defined benefit pension income will stop when your spouse dies, which means you may not be able to pass it on to children or grandchildren.

Some people therefore consider transferring their retirement savings to a defined contribution scheme, so they can pass their pension savings to their children (or whoever they’ve nominated as beneficiaries) tax-free if they die before 75. This is rarely a good decision however, as when you transfer your pension into a defined contribution plan, you give up a guaranteed income stream and take on all of the risks associated with funding your retirement – instead of leaving it for the company you worked for to worry about. Find out more about the risks of transferring a defined benefit pension in our article Should I transfer my final salary pension?

What happens to my pension if I’m single or divorced when I die?

You can nominate whoever you want to receive your defined contribution pension when you die, so it doesn’t have to be a spouse or child. You’ll need to make sure you complete an Expression of Wish/ Nomination form though, stating who you want it to go to. Make sure you update this if your circumstances have changed.

If you have a defined benefit or final salary pension, and you’re divorced or single and don’t have any children, or anyone else who is financially dependent on you, you won’t usually be able to pass your final salary pension on when you die.

Any death benefit from a final salary pension would be payable to a spouse whether nominated or not, in the form of an income rather than a lump sum. If no spouse is alive then the value goes back into the scheme. Some people choose to transfer their final salary pension savings to defined contribution pensions so that they can pass on their retirement savings when they die, but as mentioned above this comes with big risks so it’s essential to seek professional financial advice if you’re considering taking this route.

Notifying your provider of who you want to inherit your pension

Like writing a will, it’s important to ensure that you have notified your pension provider of the person, or people (your nominated beneficiaries), you want to inherit your pension in the event of your death. If you didn’t nominate anyone, the trustees of your pension can award it to anyone who’s financially dependent on you, for example, your children or spouse – but this may not be straightforward and can lead to arguments if they are not named as a beneficiary with your pension provider.

To avoid any unwanted stress and financial hardship for your loved ones after you die, it’s important to check with your pension provider and see if you have set up a nominated beneficiary for your pension. If you haven’t, ask if you can do this, as it can help give you peace of mind that your money will go where you want it to if anything were to happen to you.

Similar to updating your will, it’s a good idea to check your nominated beneficiaries every five years or so. This is especially important if you have gone through any significant life events such as a marriage or divorce, or have had children or grandchildren since you last updated it. In each instance, you must always notify your pension provider if you want to change or add a nominated beneficiary.

Where to go for pension advice

If you’re 50 or over and have a defined contribution pension, you can get free guidance available on the options available to you from the Government’s Pension Wise service.

If you want personal recommendations or advice about your specific circumstances, you’ll need to seek professional financial advice. You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.

If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.

The consultation is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.

What happens to my State Pension when I die?

What happens to your state pension when you die depends on when you reach state pension age.

If you reached state pension age BEFORE 6 April 2016

If your widow, widower or surviving civil partner hasn’t yet built up a basic state pension from their own National Insurance Contributions (NICs) record, they may be eligible for some state pension based on your contributions when you die.

For example, if you have a fuller National Insurance record than your surviving spouse or civil partner, this could help them obtain a bigger state pension than they may have otherwise been entitled to, as they can apply to use your National Insurance record instead of their own.

They may also be entitled to any extra state pension you delayed claiming when you reached state pension age.

However, if you pass away and your spouse remarries before they reach state pension age, they will forfeit the right to use your National Insurance record.
Unfortunately many widows have been underpaid their State Pensions, despite being.entitled to higher rates based on their husbands’ records. Tens of thousands have passed away without receiving a penny of the money they were owed. The DWP has promised to track down and pay the amount owed to those who have been affected by the end of 2024. Read more about this in our articles Is my State Pension being underpaid? and Underpaid State Pension scandal shows system not fit for purpose.

Your spouse or civil partner may also be able to inherit any additional state pension when you die, which could be the state second pension (S2P), formerly the state earnings-related pension scheme (SERPS) or the graduated state pension. Find out more about how these work in our guide State Second Pension and SERPS explained.

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However you choose to create or update your will, the important thing is that you do so. If you’re looking for somewhere to start, we have partnered with Farewill. They have an excellent rating on Trustpilot and are offering Rest Less members a 20% discount off the cost of writing their will.

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If you reach state pension age AFTER 6 April 2016

The new State Pension is based around the principle that individuals should build up pensions in their own right, and not receive this based on a spouse or civil partner’s record.

However, if you and your spouse or civil partner both reached state pension age after 6 April 2016, when you die, they will still be able to inherit half of any ‘protected payment’ that exists. Your ‘protected payment’ is the difference between your starting State Pension amount and the full new State Pension if you start with more than the full new state pension. It is paid in addition to their weekly state pension.

If you reached state pension age before 6 April 2016 under the old system before your death, your spouse will still be able to inherit state pension from you, even if they have reached pension age after 6 April 2016 under the new system. Learn more about how the state pension system works in our article How the State Pension works.

What happens to my State Pension if I die before I reach State Pension retirement age?

If you die before reaching State Pension retirement age your spouse might be able to inherit part of your Additional State Pension provided your marriage or civil partnership began before 6 April 2016. To be eligible for them to claim this, you must have reached State Pension age before 6 April 2016, or have died before April 6, 2016.

Your spouse won’t be able to inherit anything if they remarry or form a new civil partnership before they reach State Pension age.

What to do about the State Pension if someone has died

When a person dies, as part of getting their affairs in order, you will need to get in touch with several government services as soon as possible to let them know of the death, including the Department for Work and Pensions, who will register that the person has died and stop their State Pension payments.

Rather than contacting each government department separately, you can use the Tell Us Once service to notify a range of government departments of the death at the same time. To use it, you need a reference number from the registrar when you register the death, and various other details that are listed on the service.

The Tell Us Once service is offered by most local authorities in England, Wales and Scotland. If the service is not offered by your local authority you will need to notify these departments individually. In Northern Ireland, you’ll need to get in touch with the Bereavement Service to report the death of someone who was receiving social security benefits. Find out more in our guide What to do when someone dies.

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