What happens to my pension if I die before I retire?

One of the major concerns people have about their pensions is a very important one. What happens if you die without accessing your money? That depends on how old you are and it’s actually quite clear cut.

£1.03m limit

Pensions have a Lifetime Allowance which is the total amount you can hold in your pension savings over your lifetime. This means that if the total of all your pensions goes over the limit, your loved ones will be hit with extra tax charges.

Before 75

As long as your pension provider makes a payment to your nominated beneficiary within 2 years of your death, no income tax will be liable on your pension savings.

You may need some inheritance tax (IHT) planning as most pension schemes are held in trust. By setting up a trust, it keeps your pension separate from your estate. This limits HMRC's claim on your retirement savings.

After 75

Any money paid to your beneficiary will be subject to income tax. Your pension provider will deduct an emergency tax on HMRC’s behalf. To give you an idea, it could be 40-45% which will be automatically deducted from a lump sum payment.



You can speed things up and be tax-efficient by simply completing a nomination form. This clearly states who you’d like to receive your pension savings and how much they should get.

It pays to plan 

Planning for the life of your pension after you die can save a lot of heartbreak and money. Selecting an FCA-approved independent financial adviser via unbiased.co.uk may enable you to structure your plans in a tax-efficient way.


Tax Warning

Tax treatment will depend on your individual circumstances and may be subject to change in the future.

I'd prefer my family to benefit, not HMRC.

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