What happens to my pension pot when I die?

Your pension pot could provide important benefits to your dependants when you die. Different schemes have different rules, so don’t assume that they will be looked after.

The right advice could stop your beneficiaries from having to pay inheritance tax.

If you were to die before you retired

If you haven’t started taking an income from your pension pot, and were to die before age 75, the value of your pension pot will be passed tax-free to your beneficiaries. They can take it as a tax-free cash lump sum or a tax-free income. They may have to pay tax if any payments are made more than two years after the pension provider was told about your death.

If you haven’t started taking an income from your pension pot, and were to die age 75 or older, any payments made to your beneficiaries would be added to their income and subject to tax.

Both of these scenarios assume that the total value of your pension pot(s) is less than the Lifetime Allowance (£1 million for 2017-18). Your beneficiaries will have to pay additional tax on anything over this sum.

NB: If you're reading this because you have been bereaved, the Pensions Advisory Service gives you clear, practical advice.

What happens to my retirement income product when I die?

If at any time you use some or all of your pension pot to buy a retirement income product then the amount any beneficiaries receive can vary depending on the product and options you chose. Think carefully and shop around before you buy any retirement income product to make sure you choose the product and options that best meet your needs.

Your next steps

Or move on to the next section

Retirement Options which looks at the different ways you can access your pension pot.