Ways to pass your pension on

The way that you decide to take your pension will affect what you can do with it when you die.

Whilst it’s not always easy to talk about, the way you will eventually pass on your pension has most impact on other people, so it could help to talk with your spouse, children - or other people close to you, when you’re deciding how you take your pension savings.

Pension death benefits

The type of benefits that can be paid (lump sum and/or income options) will depend on the scheme rules and the type of arrangement the benefits are being paid from.

If you have the option to nominate who you want to benefit this may have an impact on the type of death benefits that can be paid.

Tax may be payable on the amount inherited after you die. Further information is available on the gov.uk website.

Annuity death benefits

Rather than have your money die with you, you may have selected a guarantee period or a joint life option, or both, when you set up your annuity. This means ongoing income will be paid to your loved ones for either a set period of time - or for the rest of their lives. 

Serious ill health

If you are under the age of 75 and become seriously ill (you are expected to have less than 12 months to live) you may be able to take your whole pension fund as a tax free lump sum. If you are over the age of 75 in this circumstance you may take any remaining pension as a cash lump sum which will be added to your income and taxed accordingly.

Further information regarding serious ill health and your pension can be found on the gov.uk website.

What happens to your State Pension?

When you die, your husband, wife or civil partner may be entitled to receive some of your State Pension entitlements depending on individual circumstances.

Find out more about inheriting a State Pension from a partner or increasing qualifying years on the gov.uk website

Where to get further information

Each option has its own tax implications, benefits and considerations, which you should take into account before making a decision. You can get more information from the following sources or seek financial advice:

Current rates and allowances can be found on our Tax and Allowances webpage.

Because tax rules can change, the impact of taxation (and any tax relief) depends on your individual circumstances. 

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