Passing your pension to children — the rules.
A DC pension can be left to children, and under current rules it passes outside the estate. The tax treatment depends on whether the pension holder dies before or after 75 — and the nomination form, not the will, is what directs the money.
- ▸DC pensions can be passed to children of any age. They are not restricted to spouses or financial dependants.
- ▸If the pension holder dies before 75, children receive the inherited pot entirely tax-free — as a lump sum or via drawdown.
- ▸If the holder dies at 75 or older, children pay income tax at their marginal rate on withdrawals from the inherited pension.
- ▸The pension must be directed to children via the expression of wishes (nomination form), not the will. Pensions bypass the will entirely.
Can a pension be left to children?
Yes. DC pension death benefits — from workplace pensions, SIPPs, and personal pensions — can be left to anyone the scheme trustees agree to pay, including children. There is no requirement that the beneficiary be a spouse, civil partner, or financial dependant.
The pension holder nominates their children (or any other beneficiary) using an expression of wishes — a form filed with the pension provider. Trustees have discretion over who receives the benefits, but in practice they follow the expression of wishes in the vast majority of cases. The nominations guide covers how this works in detail.
Children who are minors (under 18) can still be nominated. The benefits would typically be paid to a parent or legal guardian on the child's behalf, or held until the child reaches adulthood, depending on the scheme's rules.
Defined benefit pensions are more restrictive. Most DB schemes pay a dependent child's pension only until the child reaches 18 or 23 (if in full-time education). The primary death benefit in a DB scheme is usually the spouse's pension, not a transferable pot.
Before 75: tax-free inheritance
If the DC pension holder dies before age 75, children receive the remaining pension pot completely free of tax. No income tax, no capital gains tax, and — under current rules — no inheritance tax.
The child can take the money as:
- A tax-free lump sum — the full amount paid out at once
- Drawdown — transferred into a beneficiary drawdown arrangement, with all withdrawals tax-free
- An annuity — used to purchase a tax-free income
For an adult child with their own income and tax liabilities, inheriting a pension pot tax-free is significantly more valuable than inheriting the same amount from an ISA or bank account (which would fall within the estate and potentially attract 40% IHT).
Example: A parent dies at 72 with a £250,000 DC pension and names their two children as equal beneficiaries. Each child receives £125,000, with no tax due on any of it. If the same £250,000 had been in an ISA, it would form part of the estate and could attract IHT if the estate exceeds the nil-rate band.
After 75: income tax for the child
If the pension holder dies at 75 or older, the tax-free window closes. Children inheriting the pension pay income tax at their marginal rate on every withdrawal.
The tax rate depends on the child's own income:
- A child with no other income could withdraw up to the personal allowance (£12,570 in 2025/26) tax-free each year, then pay 20% on amounts above that
- A child earning £40,000 from employment who withdraws £15,000 from an inherited pension would pay 40% on the portion that pushes them above £50,270
- A large lump-sum withdrawal could push the child into the higher or additional rate band for that year
Drawing down gradually over multiple tax years — rather than taking a lump sum — is typically more tax-efficient. The pension inheritance calculator models these scenarios.
The pension death before and after 75 guide has worked examples showing the cliff-edge in actual pounds.
Nominations vs will: which controls it
The will has no effect on pension death benefits. This is one of the most commonly misunderstood points in pension inheritance.
Pensions are held in trust or under scheme administrator discretion. The trustees decide who receives the death benefits. The member's expression of wishes guides that decision. The will is irrelevant — even if it explicitly mentions the pension.
This means:
- A parent who wants to leave their pension to their children must name them on the expression of wishes form with their pension provider
- A parent who has named their ex-spouse on the form — and never updated it — may see the pension paid to the ex-spouse, regardless of what the will says
- If no expression of wishes is on file, trustees decide using their own judgment, which may or may not align with the member's intentions
Each pension scheme requires its own expression of wishes. A nomination filed with a workplace pension does not apply to a separate SIPP. If a parent has pensions with multiple providers, each one needs a separate form naming the children.
The form takes minutes to complete and can be updated at any time at no cost. The single most useful action for anyone who wants their pension to pass to their children is to check that the nomination form is current and names the right people.
- ▸DC pension death benefits can be paid to anyone — including children of any age — at the discretion of the scheme trustees, guided by the member's expression of wishes. [MoneyHelper]
- ▸If the pension holder dies before 75, beneficiaries (including children) receive the DC pot tax-free. After 75, withdrawals are taxed at the beneficiary's marginal income tax rate. [HMRC]
- ▸Pensions are not governed by a will. The expression of wishes filed with the pension scheme is what guides the trustees' decision on who receives death benefits. [The Pensions Regulator]
This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.