What Happens to your Final Salary Pension when you die?

A defined benefit pension – one based on your salary and length of service – will usually pay a reduced pension to your surviving spouse or civil partner. The amount is typically 50%, though some schemes pay up to two-thirds.
Exactly what happens, and how much is paid, depends on two things: the rules of your individual scheme, and the stage you were at when you died.

Three key stages: (1) still an active member of the scheme; (2) a deferred member who has left the employer but not yet taken benefits; (3) already retired and drawing your pension.
If you are already receiving your pension and you are married or in a registered civil partnership, your spouse or civil partner will normally continue to receive a reduced pension after your death. Some schemes also pay a lump sum if death occurs in the early years of retirement.
Your pension may also provide for dependent children, typically under 18, or under 23 if in full-time education. In some cases, it may extend to another adult who is financially dependent on you. Check the rules of your specific scheme.

If you die while still an active member of the scheme – still working for the employer and paying in – you may receive life cover in addition to any dependant’s pension. This is usually paid as a tax-free cash lump sum, often based on a multiple of your salary or pensionable earnings. The scheme may also refund the contributions you have made.

Life cover of this kind normally ends when you leave the employer or the scheme. If you have already retired, or if you are a deferred member, the scheme will usually only pay the reduced dependant’s pension rather than a lump sum.

Always check with your scheme administrator for the exact rules that apply to you.

A deferred member is someone who has stopped paying into the scheme, typically because they have changed jobs, but has not yet started drawing their pension.
If you die as a deferred member, your spouse may receive a reduced dependent’s pension. However, how the benefits are calculated can vary depending on when you left the scheme. In some cases, only a refund of your own contributions is payable, which is likely to be considerably less than the full pension value.
Some schemes provide a form of life cover for deferred members, but this is not common. If yours does not, it may be worth putting separate life insurance in place.
Check with your scheme administrator to confirm the exact rules for deferred members.

If you are still in a defined benefit scheme and your health deteriorates, you will continue to receive your guaranteed pension income for life, even if your life expectancy is significantly reduced. Your spouse will then receive a reduced dependent’s pension (inflation-linked and guaranteed for life) when you die.
If you have not yet started taking your pension, you may be offered a lump sum amount by your pension trustees. For those in this situation, a transfer to a defined contribution arrangement may be worth exploring. There are two potential options:

Enhanced annuity: An annuity purchased with a defined contribution pension can, in some circumstances, provide a higher guaranteed income for people with serious health conditions or reduced life expectancy.

Defined contribution inheritance rules: If leaving money to beneficiaries is a priority, a transfer to a defined contribution pension gives you the flexibility to nominate whoever you choose, including adult children or other family members, which is not possible with a final salary scheme.
Health is one of the factors that can influence whether a pension transfer is in your best interests. Any decision of this kind requires regulated advice from a Pension Transfer Specialist.

If you are married or in a registered civil partnership, your spouse or civil partner will normally receive a reduced pension automatically. No nomination is usually required, though it is worth confirming this with your scheme.
If you are unmarried and have dependent children, they may receive a dependant’s pension until age 18, or 23 if in full-time education.
Defined benefit pensions cannot be passed to adult children, friends, siblings, parents or other family members. This is one of the fundamental differences between final salary pensions and personal pensions.

The amount depends on your scheme rules, but it is typically between 50% and two-thirds of the pension you were receiving (or would have received).
This benefit ends when your spouse dies. They cannot nominate anyone to continue receiving it, and it cannot be passed on further.
The payments your spouse receives will normally remain index-linked, so the income should be protected against inflation over time.

Historically, cohabiting partners did not qualify for a dependant’s pension. A landmark Supreme Court case in 2017 established that a long-term cohabiting partner could receive automatic rights to her late partner’s pension, opening the door to similar claims.
However, you should not assume this applies automatically to your scheme. Qualifying conditions vary, and many schemes still require you to formally nominate a cohabiting partner as your beneficiary while you are alive.
If you are cohabiting and want your partner to receive your pension, check your scheme’s provisions and submit a nomination of beneficiaries form. Do not leave it to chance.

Schemes may pay either a surviving spouse’s pension or a children’s allowance, but not usually both. A children’s allowance is typically only payable if there is no surviving spouse.

To be eligible, children must normally be under 18 (or under 23 in full-time education), and must be your own or adopted children, or financially dependent on you. The allowance is usually equivalent to the spouse’s pension and is split equally between qualifying children.

It is extremely unlikely that a defined benefit pension can be passed to financially dependent adult children, even where a pattern of financial dependency can be demonstrated.

If supporting your children after their education ends is a priority, a life insurance policy is likely to be a more effective solution than relying on the pension scheme.

If you have dependent children, your scheme may provide a reduced survivors’ pension for them. Check with your scheme administrator to confirm eligibility, the amount, and the duration.

If you want to leave the full value of your pension to your children – or to any other beneficiary of your choosing – the only way to do this is to transfer from your final salary scheme to a Self-Invested Personal Pension (SIPP). In a SIPP, you can nominate any beneficiary or multiple beneficiaries to receive your pension pot.

A transfer of this kind involves giving up a guaranteed income for life. The risks are significant and require expert advice from a regulated Pension Transfer Specialist for transfers over £30,000, before taking any action.

Only in limited circumstances. Schemes may provide for dependent children under 18 or 23 in full-time education. Beyond that, non-dependent adult children, siblings, parents, and other family members are very unlikely to be eligible, even if financial dependency can be demonstrated.

But can’t you nominate anyone to inherit a pension now?
Changes to the law allowing anyone to inherit a pension apply only to personal pensions in income drawdown. They do not apply to final salary pensions or to standard annuities. Only a specific joint annuity or an annuity with a death-benefit provision can be structured differently.
Related: What happens to a defined contribution pension when you die?

In a word, nobody. If you are single or divorced and have no dependent children, your pension cannot be passed on. When you die, the value of the remaining pension is absorbed back into the scheme. 

This is one of the more significant limitations of a defined benefit pension for people without dependents. If leaving pension wealth to others matters to you, a transfer to a defined contribution arrangement is an option worth exploring. A pension transfer specialist can help you weigh the trade-offs between giving up a guaranteed income and gaining the flexibility to nominate your own beneficiaries.

Important: The inheritance tax rules around pensions are changing. From April 2027, defined contribution pension pots will be brought into the estate for inheritance tax purposes. This does not affect the income tax rules described below, and it does not change how defined benefit survivors’ pensions are taxed.

Defined benefit survivors’ pensions and income tax
If your spouse or dependant receives a continuing income from your defined benefit scheme after your death, that income is usually subject to income tax at their own marginal rate. This applies regardless of your age at death and has not changed.

Lump sums and income tax (defined contribution pensions)
Where a defined contribution pension pays a lump sum to a beneficiary, the income tax treatment depends on the age at which you die:

If you die before age 75: the lump sum can normally be paid to your beneficiaries free of income tax, provided it is paid within two years of the scheme being notified of your death.
If you die at age 75 or older: the lump sum is taxable as income for the beneficiary at their marginal rate of tax.

Inheritance tax on Pensions from April 2027
Until April 2027, defined contribution pension pots sit outside the estate for inheritance tax purposes. From April 2027, unused pension pots will be included in the estate and subject to inheritance tax at 40% above the available nil-rate band, alongside other assets.

This is a significant change for anyone using their pension as an estate planning tool. If this affects you, we strongly recommend taking regulated financial advice before the April 2027 deadline. The window to plan is limited.

Defined benefit pensions are not directly affected by this change in the same way, as they do not produce an inheritable lump sum. The surviving spouse’s pension continues as income, which remains subject to income tax as described above.