UK Pension Guide · 2026
What happens to my UK pension when I die?
How it works
Defined Contribution: provider pays death benefits per Expression of Wish. Options for beneficiaries: lump sum, drawdown (keep invested + take income), annuity. Tax: pre-75 death = tax-free for beneficiary; post-75 = beneficiary pays income tax on withdrawals. Defined Benefit: scheme pays survivor's pension to spouse/civil partner (typically 50% of member's pension); sometimes child benefits for dependents under 23. April 2027 PROPOSED change: unused pension pots become part of estate for IHT (40% above £325k threshold) — major change.
UK 2026 rates and rules
Pre-75 death: pension lump sum tax-free; drawdown income to beneficiary tax-free. Post-75 death: lump sum taxed at 'special lump sum death benefits charge' (currently 25% then varies); drawdown income taxed as beneficiary's income. Inheritance tax: pensions currently OUTSIDE estate (until April 2027 proposed change). Lump Sum and Death Benefit Allowance: £1,073,100 (mirrors abolished lifetime allowance). DB pensions: surviving spouse pension typically 50% of member's pension; varies by scheme.
What to do
1) COMPLETE Expression of Wish for every UK pension you hold — provider portal usually has the form. 2) NAME specific beneficiaries (spouse/partner, children, others) with %ages. 3) UPDATE after major life events: marriage, divorce, births, deaths. 4) CONSIDER trust structures for complex situations (children from previous relationships, blended families). 5) PLAN for April 2027 IHT change: pension pots will be part of estate for IHT purposes — may require strategy shift (use pension first vs preserving for inheritance). 6) For DB pensions: understand survivor benefits — some have 50% spouse pension, some less. 7) For unmarried partners: ESPECIALLY important to update Expression of Wish — pension provider has discretion but defaults to legal spouse if any.
Common mistakes
1) Not completing Expression of Wish (provider has discretion but may default to estate or legal spouse). 2) Outdated nominations (ex-spouse still listed years post-divorce). 3) Forgetting old pensions when updating nominations — each provider needs separate update. 4) Assuming will overrides Expression of Wish (it usually doesn't — pension is outside estate). 5) Cohabitants not updating Expression of Wish (provider may default to legal spouse if any). 6) Not planning for April 2027 IHT changes if applicable.
Worked example
Mark (52, married 2 years, divorced once) had: workplace pension £180k, SIPP £85k. He realised his Expression of Wish on workplace pension still listed his EX-WIFE from 8 years ago. He: (1) updated workplace pension nomination to current wife (90%) + adult children (5% each); (2) updated SIPP similarly; (3) discussed with current wife: if he died pre-75, she'd receive £265k tax-free (could keep in pension drawdown for tax-free income for life); if post-75, she'd pay tax on withdrawals at her marginal rate. Without the update, ex-wife would likely have received the death benefit. 30 minutes of admin avoided £200k+ going to wrong person.
Recruiter pro tip
The April 2027 inheritance tax changes to pensions are the biggest UK retirement planning shift in a decade. Currently pensions are typically the most IHT-efficient asset. From April 2027, unused pension pots will be subject to 40% IHT above the £325k threshold (combined with other estate assets). For wealthy families this fundamentally changes 'spend pension last, ISA first' planning. If you have substantial pension wealth (>£500k), revisit your retirement income sequence and inheritance plans with a financial planner before April 2027. Many people will benefit from drawing pensions earlier and preserving ISAs/property for IHT-efficient inheritance.
Important: Pension rules and rates change. Always verify current rates at gov.uk and use MoneyHelper for free guidance. For complex pension decisions (DB transfers, large estates), always seek FCA-regulated financial advice. This guide is for general information only, not financial or tax advice.
Related pension guides
How do I access my UK pension at retirement in 2026?
From age 55 (rising to 57 in April 2028), you can access your defined contribution UK pension flexibly. Three …
How is a UK pension divided in divorce?
Pensions are typically the largest financial asset in UK divorces — often more valuable than the family home. …
How does UK 25% tax-free pension cash work?
From age 55+ (rising to 57 in April 2028), you can take 25% of your defined contribution UK pension pot as a t…
Related across UK Rights & Guides