What happens to an inherited pension when you die?

When a pension beneficiary dies after inheriting, money left in their drawdown fund can pass on again; if they die before you, name someone new.

When a pension beneficiary dies: two different situations

Pension paperwork is hard to face after someone close to you has died, so take it one step at a time. The person you named may have died before you, or after receiving your pension. The two cases work differently, and this page takes them in that order. Each pension you hold has its own form. Using the form on this page, line up a free phone chat about the whole list with an FCA-authorised adviser.

Who can be named at all, and whether they count as a dependant or a nominee, is covered in who you can name as a pension beneficiary and pension nominee vs beneficiary.

What if the person you nominated dies before you?

Your nomination does not update itself, so the first job is to tell your provider or trustees and name someone else. MoneyHelper's advice is to "keep it updated, especially if things change in your life such as getting married, divorced, having children or if someone you’ve listed dies." The expression of wish guide shows how to complete a new form.

Until a new form is on file, the decision rests with the people running the pension. GOV.UK says the provider can sometimes pay the money to someone else, "for example if the nominated person cannot be found or has died." That is the discretion trustees and providers usually have: they "have the right to choose who receives your pension after you die, called exercising discretion." They usually look first at the people on your form, but need not. How a provider tends to weigh up the people closest to you is worth going through with an adviser, free, after you request a call on the form here.

A few schemes work by direction instead, so they must pay the people you nominate, and your scheme rules should say if yours does. There, an out-of-date nomination matters even more.

Two kinds of pension follow their own rules. An annuity pays only the people named when it was bought, so ask the annuity provider about anyone on it who has died. A defined benefit scheme's pension usually goes only to a dependant, so check its booklet. If nobody you named is still alive and you have not replaced them, what happens if there is no beneficiary explains where the money can go, and back-up names are in the beneficiary guide.

What happens when the beneficiary dies after inheriting your pension?

It depends on what your beneficiary did with the money, and only drawdown lets a pension pass on a second time. HMRC's Pensions Tax Manual says: "Where a dependant, nominee or successor was entitled to receive drawdown pension before they died it may be possible for a pension scheme to provide authorised benefits following their death." It adds: "It is not possible to provide an authorised benefit following the death of a dependant, nominee or successor in any other circumstance."

Two limits apply. Drawdown can come only from a money purchase pot, never a defined benefit arrangement, and a scheme need not offer it; HMRC notes that many do not. For the money to pass on, it must still be sitting in a drawdown fund when the beneficiary dies. Beneficiary flexi-access drawdown explains how an inherited pot gets there.

Successor's flexi-access drawdown and the successor's own nominations

The person who takes over is a successor. HMRC defines one as an individual who "must have been nominated by a dependant, nominee or another successor of the member to receive benefits under the arrangement following their death." So the beneficiary who inherited your pot has a say of their own. GOV.UK says: "If you inherit a defined contribution pot you can nominate someone to get any money you do not use before your death." If they name nobody, the scheme administrator may nominate someone, but that is valid only where the beneficiary had named no individual or charity.

HMRC's manual lists what the leftover money can provide: a lump sum, a successor's annuity, a successor's flexi-access drawdown fund or a charity lump sum, as the scheme allows. HMRC says "there is no minimum or maximum amount that a beneficiary can take in any tax year", though a scheme can set its own processes, including requiring everything to be taken in a single instalment.

The chain can continue. Aviva's guide to its SIPP says a beneficiary can pass on what is left in drawdown to a successor, "and so on until the funds are exhausted." Each scheme's terms decide who may be paid. HMRC gives the same choices when a successor dies. See pension drawdown for the basics.

Whatever stays in drawdown remains invested: the value can drop as well as climb, and a successor could receive less than the fund held when they inherited.

Tax when a beneficiary dies: it follows their age, not yours

For a successor, tax turns on how old the beneficiary was when they died, not how old you were. For income taken from the fund, HMRC says: "Successors’ income withdrawal is not taxable if it is paid in respect of a beneficiary who had not reached age 75 when they died." Where the beneficiary was 75 or older, "Successors’ income withdrawal is taxable if it is paid in respect of a beneficiary who was aged 75 or older when they died." Taxable income is charged at the successor's marginal rate in the year it accrues.

Separately, inheritance tax is changing. Finance Act 2026, section 71, says the amendments made by sections 66 to 70 apply to deaths "occurring on or after 6 April 2027". Whether a beneficiary's leftover drawdown fund will count in their own estate is worth raising; an adviser can take that question at no cost, ringing you back once the enquiry form here reaches them. Pensions and inheritance tax explains what the change means in practice.

A lump sum from what is left in the beneficiary's drawdown fund also turns on the beneficiary's age: taxable if they were 75 or older, normally tax-free if younger, though it can be tested against the original owner's allowance, explained in the lump sum and death benefit allowance guide. Before 28 October 2026, it also had to be paid within two years of the scheme first knowing, or being reasonably expected to know, of the death. HMRC's manual now says: "For payments made on or after 28 October 2026 there is no relevant two-year period." The change was announced in that day's Budget; legislation will follow in Finance Bill 2026-27, and HMRC has told schemes to stop deducting tax just because a payment is late. Rates and collection are in inherited pension tax.

Smaller points when a nominated person dies

Should I update my provider as soon as someone I named has died?

MoneyHelper advises keeping the form current, though there is no need to rush while you grieve. Each pension keeps its own record, so a note of every provider and scheme helps when you feel ready.

Can a successor take the money slowly?

Usually, because the tax rules set no minimum or maximum a year. The scheme decides its own processes, though, and may ask for everything to come out at once, so check its guide.

Can a defined benefit pension pass to a successor?

Not through successor's drawdown, which can only come from a money purchase pot. What a defined benefit scheme pays after a dependant dies is set by its own rules.

Can the money go to a charity?

HMRC lists a charity lump sum death benefit among the payments possible after a dependant, nominee or successor dies, so it can be an option where the scheme's rules allow.

Checking the pensions you hold

A short list helps: each pension, who is named on it, whether they are alive and whether a back-up is named. Workplace pensions have their own wrinkles, covered in workplace pension death benefits, and pension death benefits gives the whole picture. Once the list is ready, an FCA-authorised adviser can check each pension with you at no cost; request that call-back in the short form here.

Documents read on 2 November 2026 for this page: MoneyHelper, What happens to my pension when I die? (archived copy, 26 July 2026); GOV.UK guidance on tax when you inherit a pension; HMRC Pensions Tax Manual PTM071300, PTM071400, PTM072410, PTM072430 and PTM073600; Aviva, What happens to my SIPP when I die? (last updated 26 June 2026); Finance Act 2026, section 71; HMRC, Income Tax: removing the pensions tax two-year rule (published 28 October 2026) and Pension schemes newsletter 186.