Pension After Death Guide: Steps, Documents, and Practical Tips

Losing a loved one is an emotionally taxing experience, and the subsequent administrative burden can feel overwhelming. Among the most critical financial tasks is managing a pension after death. Unlike a house or a bank account, pensions are governed by unique trust laws and tax regulations that often surprise beneficiaries. Understanding how to navigate the claims process, identify a survivor pension, and correctly name a pension beneficiary is essential to ensuring financial security for those left behind.

In this guide, we will break down the latest 2025–2026 legislative shifts, the steps you need to take immediately, and the common pitfalls that can lead to unnecessary tax bills or lost funds.

Understanding the Landscape of Pensions After Death

In the UK, the rules surrounding your pension pot when you pass away depend heavily on the type of pension you held and your age at the time of death. As we move into 2025, the digital landscape is changing with the launch of the Pensions Dashboards, but the legal framework remains rooted in the distinction between Defined Contribution (DC) and Defined Benefit (DB) schemes.

The Two-Year Rule

To receive benefits tax-free—assuming the deceased was under the age of 75—the claim must usually be completed and paid within two years of the provider being notified of the death. If the process drags on beyond this window, the HM Revenue & Customs (HMRC) may apply income tax charges, even if the death occurred well before age 75.

The "Age 75" Rule

This is the "golden rule" of UK pension inheritance:

• Death before 75: Usually, the pension beneficiary receives the pot entirely tax-free, provided it is within the allowance limits.
• Death at or after 75: The beneficiary must pay income tax on any withdrawals at their own marginal rate (e.g., 20%, 40%, or 45%).

Immediate Steps: What to Do First

When someone passes away, the pension provider is rarely the first to know. You must take proactive steps to trigger the payment process.

1. Use the "Tell Us Once" Service

When you register a death at the registry office, you will be offered the "Tell Us Once" service. This is a highly efficient government tool that notifies the Department for Work and Pensions (DWP) and the State Pension service simultaneously. This stops State Pension payments immediately, preventing the need to pay back overpayments later.

2. Locate the Paperwork

You will need the deceased’s National Insurance (NI) number and their pension scheme member number. These are typically found on annual statements or "Expression of Wish" forms.

3. Notify Private and Workplace Providers

If the deceased had private or workplace pensions, you must contact each provider individually. Be prepared to provide an original or certified copy of the death certificate.

The 2024/2025 Tax Shift: LSDBA Explained

A major change occurred in April 2024 with the abolition of the Lifetime Allowance (LTA). It was replaced by the Lump Sum and Death Benefit Allowance (LSDBA).

For the 2024/2025 and 2025/2026 tax years, the LSDBA is set at £1,073,100. This is the maximum amount that can be paid out as a tax-free lump sum across all of a person’s pensions upon death (if they die before 75). Any amount paid as a lump sum exceeding this limit is taxed at the beneficiary’s marginal income tax rate.

The Massive 2027 Inheritance Tax (IHT) Change

For years, one of the biggest advantages of a pension was that it sat "outside the estate" for Inheritance Tax purposes. However, the 2024 Autumn Budget introduced a seismic shift.

Starting April 6, 2027, most unused pension funds and death benefits will be included in the value of an estate for IHT purposes. This means that if the total value of the estate (including the pension) exceeds the IHT thresholds, a 40% tax rate could apply to the pension pot.

Types of Pensions and Inheritor Rights

The State Pension

Most State Pensions stop the moment the person dies. However, a surviving spouse or civil partner may be entitled to inherit a portion of the "Additional State Pension" or a "Protected Payment." This usually happens automatically if you are of State Pension age, but you should always check with the Pension Service.

Defined Contribution (DC) Pensions

These are modern "pot" style pensions (like Nest, People’s Pension, or SIPP). The remaining money in the pot belongs to the pension beneficiary. The beneficiary can usually choose to take the money as a lump sum, set up a regular income (flexi-access drawdown), or buy an annuity.

Defined Benefit (DB) Pensions

Also known as "Final Salary" schemes, these are rarer and more complex. Instead of a pot of money, they provide a guaranteed income for life.

• Spouse’s Pension: Usually pays a reduced income (often 50%) to the surviving spouse for the rest of their life.
• Children’s Pension: May pay out until the child reaches 18 (or 23 if in full-time education).

Real-World Case Studies

Example 1: The "Expression of Wish" Oversight

John passed away in 2024. In his Will, he left everything to his current wife, Sarah. However, he never updated his pension "Expression of Wish" form, which still named his ex-wife, Linda. Because pensions are held in trust, the pension provider paid the £200,000 pot to Linda. Sarah had no legal recourse because the pension sat outside the estate.

Example 2: The Lost Pension Find

Mary’s husband passed away with only one known pension. Mary used the government’s Pension Tracing Service and a digital tool called Gretel. She discovered two small workplace pots from her husband’s early career in the 1990s. These "lost" pots were worth £15,000—a vital lifeline for Mary’s retirement.

Example 3: The Age 75 Threshold

David died at age 74 and 11 months. His daughter inherited his £400,000 pension pot entirely tax-free. If David had died just two months later, his daughter would have had to pay 40% income tax on any withdrawals, as she was a higher-rate taxpayer.

How to Find a "Lost" Pension

With an estimated £31.1 billion sitting in unclaimed pots, there is a high chance your loved one had a pension they forgot about. This often happens because people change jobs an average of 11 times during their career.

1. Search Paperwork: Look for any old P60s, payslips, or annual statements.
2. Contact Former Employers: They are legally required to give you the contact details of the pension provider they used.
3. Use the Pension Tracing Service: A free government service that helps you find the contact details for your search.
4. Pensions Dashboard (2025): Starting in 2025, the Pensions Dashboards ecosystem will begin connecting schemes, eventually allowing you to see all pension assets in one digital interface.

Required Documents Checklist

To claim a pension after death, you will typically need the following:

Common Mistakes to Avoid

1. Forgetting to Update Beneficiaries

As seen in the case study above, a pension provider is guided by the nomination form, not the Will. Ensure you audit your nominations every 3 years.

2. Missing Out on Pension Credit

Over 800,000 UK households fail to claim Pension Credit. If a survivor’s income drops significantly after a partner's death, they should check eligibility immediately. This unlocks other benefits like the Warm Home Discount and free TV licences for those over 75.

3. Waiting Too Long to Claim

The two-year window is strict. If you notify the provider 25 months after the death, the tax-free status of a "pre-75" death can be lost.

4. Ignoring "Death in Service" Benefits

Many workplace schemes pay a lump sum (often 2–4 times the deceased's salary) if they die while still employed. This is separate from the pension pot and is usually paid out very quickly to help with immediate costs.

Conclusion

Managing a pension after death is a marathon, not a sprint. By understanding the "Age 75" rule, keeping a close eye on the upcoming 2027 Inheritance Tax changes, and utilizing services like "Tell Us Once," you can protect your loved one's legacy. Remember that the pension beneficiary holds the right to these funds, but the clock is ticking on the two-year tax-free window.

If you are currently handling the affairs of a loved one, you may also find our guides on UK Pension After Death (Practical Steps and Documents) and Accessing Deceased Bank Account (Practical Steps and Documents) helpful in navigating the wider financial landscape.