If you die before touching your pension, that money does not automatically go to your family the way a bank account or house would. A £300,000 defined contribution pot left to a nominated beneficiary before age 75 currently passes entirely free of income tax and inheritance tax — the same £300,000 in a savings account would face up to 40% IHT on anything above the nil-rate bands. Most people assume their will decides where pension money goes. It does not.
Disclosure: Some links on this page are affiliate links. If you make a purchase through them, Britwealth may earn a commission at no extra cost to you. We only include products and services that are relevant to the topic.
This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The reason pensions sit outside your estate is that most are held in a discretionary trust by the scheme trustees. That trust structure is what keeps them free of probate and, until April 2027, free of inheritance tax. But it also means your will has no say over who gets the money. The only document that matters is your expression of wish form — one per pension, updatable at any time, and frequently left to gather dust with an ex-spouse still named on it. If you have ever changed jobs, you probably have at least one old pension with a nomination form you filled in years ago and forgot about. Here is what you actually need to know.
What an expression of wish actually does
An expression of wish form — sometimes called a nomination of beneficiaries form — is a document you complete for each pension provider stating who you would like to receive the death benefits. It is not legally binding. The trustees have final discretion. But in practice they almost always follow it, provided it is recent and clear.
Because the form is kept separate from your will, it bypasses probate entirely. That means your beneficiaries can receive the money quickly — often within weeks — rather than waiting months for the legal process to finish. It also means that if you divorce and remarry but never update the form, your ex-spouse could receive the full pot while your current partner gets nothing. The trustees follow the most recent form on file, not your will. One brief first-person observation: what I tend to notice is that people update their will after a divorce but forget the pension nomination entirely, and that single oversight can undo years of careful estate planning. If you want to understand how pensions fit into your broader estate, checking whether your pension pot is enough for a comfortable life is a good place to start.
The numbers that actually govern this
Three figures determine what your beneficiaries receive: your age at death, the type of pension you hold, and whether you have kept your nomination up to date. The table below shows how the two main pension types compare on death.
→ Scroll right to see all columns
| Feature | Defined Contribution (DC) | Defined Benefit (DB) |
|---|---|---|
| Who can inherit | Anyone you nominate — spouse, children, friends, charity | Usually only spouse/civil partner and children under 23 |
| Death before retirement | Full unused pot passes to nominees | Lump sum of 2–4× salary + dependant’s pension (~50% of your pension) |
| Death after retirement | Remaining pot passes to nominees | Reduced dependant’s pension continues for life |
| Tax if die before 75 | Income tax free (up to £1,073,100 LSDBA) | Dependant’s pension taxed as income; lump sum may be tax-free |
| Tax if die 75+ | Taxed at beneficiary’s marginal rate when drawn | Dependant’s pension taxed as income |
| IHT (current, pre-2027) | Outside estate — 0% IHT | Outside estate — 0% IHT |
The £1,073,100 Lump Sum and Death Benefit Allowance is the ceiling for tax-free lump sum death benefits if you die before 75. Anything above that is taxed at the beneficiary’s marginal rate. For someone who dies at 68 with a £500,000 SIPP, a basic-rate taxpayer beneficiary can receive the full amount tax-free as a lump sum or hold it in drawdown and pay tax only on withdrawals above their personal allowance. Die at 76 with the same pot, and every withdrawal is taxed as income.
The two-year rule adds another layer. If the trustees take longer than two years to pay a lump sum death benefit after being notified of the death, the tax-free treatment for under-75 deaths can be lost and a 45% tax charge may apply in some circumstances. Clear paperwork and an up-to-date nomination reduce the risk of delay.
Errors and gaps that cost your beneficiaries
Naming an ex-spouse on the nomination form
This is the single most common and most costly mistake. Divorce happens, the pension nomination stays unchanged, and the trustees pay the ex-spouse because that is the most recent form they have. Your will can say whatever it likes — it does not override the nomination. The fix takes ten minutes: log in to each pension provider’s online portal or call them, request a new expression of wish form, and name your current beneficiaries. Do this after every marriage, divorce, birth of a child, or death of a named beneficiary.
Having no nomination form at all
If you die without completing an expression of wish, the trustees use full discretion. They will typically pay the spouse first, then children, but there is no guarantee and the process takes longer. In some cases the money ends up in your estate anyway, which means it goes through probate and loses its IHT protection. Every pension you hold — current and old — needs its own form. Creative savings strategies are less useful if the pension itself never reaches the people you intended.
Assuming DB and DC work the same
A defined benefit scheme does not have a pot of money to pass on. It pays a reduced income to your spouse — typically 50% of your pension — for the rest of their life. Adult children, friends, and charities usually cannot inherit anything. If you are in a DB scheme and want to leave pension wealth to someone other than a dependant, you may need to consider other options. Transferring out of a DB scheme to create that flexibility is rarely advisable because you give up a guaranteed income and survivor benefits.
Ignoring the 2027 IHT change until it is too late
Waiting until 2026 to review your estate plan means you lose years of potential planning. The change affects anyone with a defined contribution pot who has a total estate — including property and savings — above the nil-rate bands. Actions to consider now include spending pension income during retirement rather than drawing down other assets, reviewing life insurance written in trust, and updating your will to reflect that the pension can no longer be relied upon as a tax-free legacy vehicle.
How to make sure your pension reaches who you want
Complete and update your expression of wish forms
Every pension provider offers a nomination form. Log in to your online portal or call the provider. Name specific people with their full name, date of birth, and relationship to you. You can split the pot between multiple beneficiaries — 50% to your spouse, 25% to each of two children, for example. You can also name a trust as a beneficiary, which can be useful for IHT planning. Update the form after every major life event. There is no limit to how often you can change it.
Understand the age-75 tax boundary
If you die before 75, your beneficiaries can take the entire DC pot tax-free as a lump sum or hold it in drawdown and withdraw tax-free. If you die at 75 or older, every withdrawal is taxed at their marginal rate. This makes the timing of your death — which you cannot control — the single biggest factor in how much tax your beneficiaries pay. What you can control is whether your nomination is current and whether your beneficiaries know they have the option of inherited drawdown rather than taking a lump sum and triggering a large tax bill.
Know what your DB scheme actually pays
Contact your scheme administrator and ask for a breakdown of the death benefits. Key questions: what percentage of my pension will my spouse receive? Is there a lump sum death-in-service benefit and how is it calculated? Does the scheme have a guarantee period — typically five or ten years — where payments continue to your estate if you die soon after retiring? The answers vary significantly between public sector schemes like NHS, teachers, and civil service, and private sector DB schemes.
Plan for the April 2027 IHT change now
If your total estate — including your pension pot — exceeds your available nil-rate bands (£325,000 per person, plus up to £175,000 residence nil-rate band if you leave a home to direct descendants), the 2027 change will likely mean a 40% IHT charge on the pension portion above the threshold. Strategies to discuss with a qualified adviser include drawing down pension income in retirement rather than spending other assets first, using gifts and trusts to reduce the estate value, and reviewing life insurance policies written in trust to cover the potential IHT liability. The pension administrator will be responsible for deducting and paying the IHT before releasing death benefits, so your beneficiaries may receive significantly less than the full pot value.
Frequently asked questions
Does my pension pass through my will? ▾
What happens if I die before 75 but have already started drawing my pension? ▾
Can I nominate a trust as a beneficiary of my pension? ▾
What happens to my state pension when I die? ▾
How does the two-year rule affect death benefits? ▾
The April 2027 deadline changes everything about pension inheritance
For most of the past two decades, pensions have been the most tax-efficient way to pass wealth to the next generation. That changes in April 2027. If you have a defined contribution pot worth more than a few hundred thousand pounds and a total estate that pushes you near the IHT threshold, the strategy of leaving your pension untouched to pass on tax-free will no longer work. The window to plan is now — not 2026. Review your nomination forms, understand what your DB scheme pays, and get qualified advice if your estate is likely to exceed the nil-rate bands.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Retirement Dreams vs Reality: Bridging the Gap for a Fulfilling Future.
Sources and Further Reading
Retire Rich: Is Your Pension Pot Really Enough for a Comfortable Life? — A practical look at whether your current savings will deliver the retirement income you expect.
Bridging the Pension Gap: Creative UK Savings Strategies — Alternative approaches to closing shortfalls in your retirement planning.
WillSafe UK (2026). What Happens to Your Pension When You Die in the UK. 🔗
PocketWise (2026). Workplace Pension Death Benefits Guide. 🔗
PocketWise (2026). What Happens to Pension When You Die. 🔗
GOV.UK (2026). When you die: your pension and what happens to it. 🔗
