Your pension may be one of your most valuable assets, and how it's treated on death can have a significant impact on your estate plan. The rules around pension death benefits changed significantly in recent years, and 2026 brings further considerations.
Most defined contribution pensions allow you to nominate beneficiaries who will receive the fund when you die. This is done through an 'expression of wishes' form — not through your Will. The pension trustees make the final decision, but they usually follow your nomination.
If you die before age 75, your pension fund can be passed to your beneficiaries completely tax-free, provided it's paid out within two years. If you die after 75, beneficiaries pay income tax at their marginal rate on any withdrawals.
From April 2027, the government has announced that inherited pensions will be brought into the IHT net. This is a significant change that affects long-term planning. While it doesn't take effect until 2027, planning now is essential.
It's crucial to keep your pension nominations up to date. If you've married, divorced, or had children since completing your nomination, it may no longer reflect your wishes.
Defined benefit (final salary) pensions work differently. These typically pay a spouse's pension of 50% of the member's pension, with no option to nominate other beneficiaries.
At Castle Family Legal, we consider your pension arrangements as part of your overall estate plan. Contact us to ensure your pension death benefits are properly coordinated with your Will.
