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.

If you die with money left in your pension 

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

Unless you die at age 75 or older, if it’s less than the Lifetime Allowance (£1 million in the 2016/17 tax year) and the scheme is notified within two years of death, it will be paid tax-free.

The way that you pass on your pension when you die mean that:

If you die before age 75:

  • Your pension can be paid to your beneficiaries tax-free, either as a lump sum, an annuity, or through flexi-access drawdown.

If you die age 75 or over, your beneficiaries can:

  • Take the money in cash, which is currently subject to income tax at the beneficiaries' marginal tax rate.
  • Convert it to a flexi-access drawdown plan, which is taxed as their income.
  • Buy an annuity, which is taxed as their income.

In most cases there will be no Inheritance tax to pay.

If you die with money left in flexi-access drawdown

Your beneficiaries have several options - again depending on your age at death.

If you die before 75 years of age your beneficiaries can:

  • Take the money as a tax-free cash lump sum.
  • Stay in flexi-access drawdown. The income from it will be tax-free.
  • Buy an annuity. The income from it will be tax-free. 

If you die age 75 or older, your beneficiaries can:

  • Take the money in cash, which is currently subject to income tax at the beneficiaries' marginal tax rate.
  • Stay in flexi-access drawdown, which is taxed as their income.
  • Buy an annuity, which is taxed as their income.

What happens to your pension after you die when you have an annuity?


Rather than have your money die with you, you may have selected a ‘guarantee period’ or the ‘joint life option’, or both, when you set up your annuity. This means any remaining funds you have left in the annuity will be passed on to loved ones for either a set period of time - or for the rest of their lives. 

What happens to your State Pension? 

Although your State Pension is paid only to you and can’t be passed on to someone else, if you’ve contributed towards an Additional State Pension then your spouse or civil partner might get some of this. If they’re over State Pension Age when you die, they may also be able to increase their basic State Pension by using your qualifying years entitlement - as long as they don’t already get a full pension. 

If your spouse or partner is under State Pension Age when you die, then any State Pension based on your qualifying years entitlement will be added to theirs when they claim it - as long as they haven’t remarried, or formed a new civil partnership by the time they reach State Pension Age. Find out more about inheriting a State Pension from a partner or  increasing qualifying years on the gov.uk website. 

If you deferred your State Pension then your spouse or civil partner may be able to claim an Additional State Pension or lump sum when you die. 

More information

Find out more about the different ways you can take your pension within our related content below. Each option has its own tax implications, benefits and considerations, which you should take into account before making a decision.

Tax rules require careful consideration and may not reflect your individual circumstances so your actual liability may be higher or lower. The above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit www.hmrc.gov.uk.

Need help? Have questions?

If you're looking for further information or want to chat about your product options, we can help.

Contact us