What happens to your pension when you die: the age-75 rule explained

A pension is usually the largest asset a person owns after their home, and it is the one most often left to chance. It does not pass under your will. The tax treatment changes on your 75th birthday. And the document that actually determines who receives it is a form most people completed when they joined a job and have never looked at since.

This guide covers who decides, how beneficiaries are taxed, how defined benefit schemes differ, and the handful of practical steps that make the difference.

At a glance

Why your pension is not part of your estate

This is the point that surprises people most, and it has real consequences.

A defined contribution pension is normally held under a trust. That means the scheme's trustees — not your executors — decide who receives the money. Your will has no direct authority over it, and instructions in your will about your pension are not binding on the trustees.

What guides them is your expression of wish, sometimes called a nomination or beneficiary form. It is deliberately non-binding: that element of trustee discretion is precisely what has historically kept pension funds outside your estate. In practice, trustees follow a clear and current expression of wish unless circumstances have obviously changed — for example where the named person has died, or where a dependent child exists who was not mentioned.

The consequence is blunt. If your form still names an ex-partner from a job you left in 2011, that is who the trustees are most likely to pay. Divorce does not update it. Remarriage does not update it. A carefully drafted new will does not update it. Only you can, and only by contacting each scheme separately.

How are beneficiaries taxed?

For defined contribution pensions, the age at which you die has historically determined the income tax treatment of what your beneficiaries draw:

Two details inside that table do a lot of work.

First, the two-year window. Beneficiaries generally need to designate or take the benefits within two years of the scheme being notified of the death. Miss it and favourable treatment can be lost. In the year following a bereavement, two years passes faster than anyone expects, and this is a common and entirely avoidable loss.

Second, after 75 the tax follows the beneficiary's marginal rate — not yours. That changes how much of the pot actually survives, depending on who receives it.

Worked example: why who inherits matters

Margaret dies at 78 leaving a £200,000 pension pot. Consider two scenarios.

Scenario one: everything passes to her son, a higher-rate taxpayer who withdraws it over four years alongside a full salary. Most of it is taxed at 40%, and in the years he takes larger amounts some is pushed into the additional rate band.

Scenario two: the pot is split between her son, her non-earning daughter-in-law and two adult grandchildren, each drawing gradually. Several of them have unused personal allowance and basic-rate band available, so a substantial portion is taxed at 0% or 20%.

Same pot, same death, materially different outcome — determined entirely by the expression of wish form. This is why spreading beneficiaries is worth considering, and why beneficiary drawdown (where each recipient keeps their share invested and draws it gradually) is generally better than a single forced lump sum.

Pensions and inheritance tax

Pensions have traditionally sat outside your estate for inheritance tax purposes, which is why advisers have long suggested spending other assets first and leaving the pension untouched.

The government has consulted on bringing unused pension funds within the scope of inheritance tax, and the position has been moving. This is the one part of this guide you should not act on without checking the current rules. If a pension forms a material part of your estate planning, confirm today's position on GOV.UK or with a regulated adviser before making decisions.

For context on the estate side, the inheritance tax nil-rate band is £325,000, with a residence nil-rate band of a further £175,000 where a home passes to direct descendants, and the rate above those thresholds is 40%. Our guide to inheritance tax when the second parent dies explains how the transferable bands work.

Defined benefit schemes work differently

Final salary and career average schemes do not pass on a pot of money. They pay a survivor's pension — typically a percentage of your pension, often around half, to a spouse or civil partner, sometimes with additional children's pensions while children are dependent.

Two consequences follow, and both catch people out.

Unmarried partners are frequently not covered, or are covered only at the trustees' discretion and often only where financial dependency can be demonstrated. If you are in a long-term unmarried relationship with a DB pension, read the scheme rules rather than assuming.

There is nothing left for children once the survivor's pension ends. A DB pension cannot be inherited down the generations the way a DC pot can. For some families this is a genuine argument for building DC savings alongside, though transferring out of a DB scheme is a major decision requiring regulated advice and is rarely the right answer.

Many schemes also pay a lump sum death benefit if you die before drawing the pension — often a multiple of salary. That has its own nomination form, separate from anything else.

If you are the beneficiary: what happens next

The process usually begins when the scheme is notified of the death, either by the family or by the executors. The scheme then writes to potential beneficiaries and asks for information about their circumstances, because the trustees are exercising discretion rather than simply following an instruction.

You will normally be offered a choice between taking a lump sum, moving the money into beneficiary drawdown in your own name, or in some cases buying an annuity. Beneficiary drawdown is worth understanding properly, because it keeps the money invested in a tax-privileged wrapper and lets you control the timing of withdrawals — which, after a death at 75 or over, directly controls your tax bill.

Taking a large lump sum in a single tax year is very often the most expensive option available, and it is frequently chosen simply because it is the default that gets offered first. If the deceased was 75 or over and the pot is substantial, drawing it over several years instead can save a great deal.

Watch for emergency tax on the first payment. Providers commonly apply an emergency code, which over-deducts, and you reclaim the difference from HMRC rather than waiting until the year end. Our Emergency Tax Calculator will estimate what you are owed.

Four mistakes that cost families money

• An expression of wish naming someone from a previous relationship. Overwhelmingly the most common, and entirely avoidable.
• Forgetting a scheme. Each pension needs its own form. People update the current one and leave three others pointing at a parent who has since died.
• Taking everything as a lump sum after a death at 75 or over, when phased withdrawals across beneficiaries and tax years would have preserved far more.
• Missing the two-year designation window during a period when nobody felt like dealing with paperwork.

What to actually do

1. List every pension you have ever had. Old payslips and P60s help; so does the government's Pension Tracing Service. Our guide to tracing lost savings covers similar ground.
2. Complete a current expression of wish for each one. One per scheme. Doing it for your main pension does not cover the others.
3. Review after every life event. Marriage, divorce, a birth, a death, a house move, a new job.
4. Consider naming more than one beneficiary. After 75 the tax follows each person's own rate, so spreading can preserve significantly more.
5. Check your scheme offers beneficiary drawdown. Older contracts sometimes only permit a lump sum, forcing the entire amount into one tax year. A transfer while you are alive may be worth exploring.
6. Tell your family the pensions exist. Unclaimed pots are a widespread problem, and trustees cannot pay someone who never comes forward.

If you are working out how much of your pension you are likely to leave rather than spend, the Pension Drawdown Calculator will model different withdrawal rates against your pot.

A note on how to use this

This guide explains the rules as they stand for the 2026/27 tax year and is written to help you understand your own position. It is general information, not personal financial advice — your circumstances change the answer, sometimes completely. For a decision that matters, speak to a regulated adviser or check directly with HMRC. Our calculation methodology sets out where every figure on this site comes from.

Where these figures come from

Every rate and threshold on this page is checked against HMRC's published guidance for the 2026/27 tax year. If you spot a figure that looks out of date, please tell us.

• GOV.UK guidance for this topic