Death and pensions

What happens to your pension when you die?

If you’ve money left in your pension pot

If you die before you take anything from your pension, it will usually be paid as a lump sum to your beneficiaries tax-free.

As long as it is less than the lifetime allowance (£1 million in tax year 2017/18) it will be paid tax-free, unless you die at age 75 or older.

  • If you die before age 75 – your pension pot can be paid to your beneficiaries tax-free, and they can choose to take it as an annuity, a lump sum or through flexible drawdown.
  • If you die age 75 or older – your pension pot can be paid to your beneficiaries either as a lump sum or through flexible drawdown. All payments will be subject to income tax at their marginal rate.

There will normally be no inheritance tax to pay.


If you’ve money left in flexible drawdown

If you die before age 75 with your money in flexible drawdown your spouse, partner, dependant or beneficiary can:

  1. stay in the flexible drawdown plan and take income tax-free
  2. take the pension as a lump sum tax-free
  3. buy an annuity, where income will be paid tax-free.

If you die after age 75 with your money in flexible drawdown your spouse, partner, dependant or beneficiary can:

  1. stay in the flexible drawdown plan and take income subject to tax at their marginal rate
  2. take the pension as a lump sum which will be subject to income tax at their marginal rate
  3. buy an annuity, where income will be subject to tax at their marginal rate.

If you have an annuity

If you chose a guaranteed period and die within this period then the annuity will be paid until the end of the guaranteed period.

If you bought a joint life annuity the annuity payments will be paid to the second person, at the level you chose, until they die. If you die before age 75 the annuity payments paid will be tax-free, if you die after age 75 then any payments will be taxed as income at their marginal rate.

In all other cases your money dies with you so no further payments are made.

Read more about passing on your pension and tax


What happens to your State Pension?

Your basic State Pension is paid only to you and can’t be passed on to someone else when you die. If you have contributed towards an additional State Pension your spouse or civil partner may get some of this.

If your spouse or civil partner is over State Pension age when you die, they may be able to increase their basic State Pension by using your qualifying years of entitlement. That is, as long as they don’t already get a full pension.

If your spouse or civil partner is under State Pension age when you die, any State Pension based on your qualifying years of entitlement will be added to their State Pension when they claim it. For this to happen they can’t have remarried or formed a new civil partnership by the time they reach State Pension age.

If you’ve deferred your State Pension and you die, your spouse or civil partner may be able to claim an additional State Pension or a lump sum.

Read more about what happens to your State Pension on death

Taking your money

Aged 55 or over? If you’ve understood the retirement basics, then explore your pension options.

Your pension options

Explore Retirement

Once you’ve got the basics, it’s time to take a look at some of the other stages of the retirement journey.

Retirement explained

Got a question?

If you need to ask us a question about pensions or retirement, then get in touch. There are lots of ways to contact us.

Contact us