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Does Your Pension Form Part of Your Estate?

· 30 min

Note: The following scenario is fictional and used for illustration.

Michael spent 30 years as a financial analyst in Leeds, carefully building a £420,000 pension pot across three workplace schemes. He drafted his will meticulously, splitting his £890,000 estate between his wife Claire and their two adult children. When he died unexpectedly at 62, Claire discovered something shocking: none of Michael's pensions appeared in the probate documents.

The pension trustees, lacking a recent expression of wish form, launched their own investigation to decide who should receive £420,000—nearly half of Michael's total wealth. The process took 14 months. Had Michael died after April 2027, his estate would have faced an additional £38,000 inheritance tax bill on those pension funds.

Research from Canada Life shows that 72% of UK adults haven't completed an expression of wish form for their pensions. From April 2027, the government estimates approximately 10,500 estates will become liable for inheritance tax where they weren't before, with an average increase of £34,000 when pension assets are included.

This guide explains exactly how pensions interact with your estate, what happens under current rules, how the 2027 changes will affect you, and the specific steps to coordinate your pension and will planning.

Table of Contents

The Current Rule: Why Pensions Sit Outside Your Estate

Most UK pension schemes are structured as discretionary trusts where trustees hold the assets on behalf of members. You don't have a fixed legal entitlement to specific funds—trustees exercise discretion about how death benefits are distributed.

This discretionary structure means pension assets aren't legally "owned" by your estate at death. While your house, savings, and investments pass through probate under the control of your will, your pension follows a completely separate path governed by scheme rules and trustee decisions.

The Local Government Pension Scheme Regulations 2013 allows trustees to make payments without requiring a grant of probate for smaller sums. This demonstrates the fundamental separation between pension assets and estate assets.

Sarah, 63, retired teacher, Sheffield has a £280,000 Teachers' Pension sitting in a discretionary trust. When she dies, the trustees decide who receives death benefits based on her expression of wish form—not her will. Her estate (house, savings, investments) goes through probate, but her pension doesn't. The two processes run on parallel tracks.

Why this matters:

  • Pensions bypass probate entirely (currently)
  • They avoid inheritance tax under current rules
  • Your will doesn't govern pension distribution
  • Trustees make decisions based on scheme rules, not your estate plan
  • Expression of wish forms guide trustees (but aren't legally binding in most cases)

The exception comes with some public sector non-discretionary schemes, where your nomination is binding rather than advisory. We'll explore this distinction in detail later.

Out of approximately 213,000 estates with inheritable pension wealth in 2027-2028, most pension schemes operate under this discretionary trust model. Understanding this structure is essential for coordinating your pension and estate planning.

How Pension Death Benefits Work in the UK

When you die, your pension scheme doesn't automatically pay out to anyone. The trustees follow a specific process to decide who receives death benefits and in what form.

Here's the typical timeline:

  1. Notification of death (family contacts pension scheme)
  2. Trustee investigation (2-12 weeks depending on complexity)
  3. Review of expression of wish form (if one exists)
  4. Consideration of dependants (spouse, civil partner, financially dependent children)
  5. Decision on beneficiaries and payment method (lump sum, drawdown, annuity)
  6. Payment to beneficiaries (typically 2-6 months after notification)

The two-year rule is critical: benefits paid within 24 months of the scheme learning of your death can be tax-free if you died before age 75. Reference HMRC Pensions Tax Manual PTM071000 for the full framework on death benefits.

David, 52, IT contractor, Bristol died in January 2025. His widow notified the pension scheme immediately. Trustees reviewed his expression of wish form in February, conducted their investigation in March, and paid a lump sum to his widow in April 2025. Because David died before age 75 and payment occurred within the two-year window, the £180,000 was completely tax-free.

Death benefit options include:

  • Lump sum payment: One-time payment to beneficiaries (typical for defined contribution schemes)
  • Beneficiary drawdown: Funds remain in pension wrapper; beneficiary draws income as needed
  • Dependant's annuity: Guaranteed income for life for spouse/dependant (common in defined benefit schemes)
  • Death in service benefits: Multiple of salary paid by employer schemes (typically 2x-4x annual salary)

Who counts as a "dependant" for pension purposes? Spouses and civil partners always qualify. Children under 23 (or any age if disabled) qualify. Adult children or other relatives may qualify if financially dependent on you at the time of death.

Payment can happen without a grant of probate for discretionary schemes because the pension assets don't form part of your estate under current law. Trustees distribute directly to beneficiaries based on their discretion and your expression of wish form.

Expression of wish forms are non-binding for most UK schemes. Trustees usually follow them, but they're not legally required to. This is why updating these forms regularly is essential—they're your primary means of communicating your intentions to trustees.

Discretionary vs. Non-Discretionary Pension Schemes

The type of pension scheme you have determines whether trustees must follow your nomination or can exercise discretion. This distinction affects your control over who inherits and the current inheritance tax treatment.

Discretionary schemes give trustees final decision-making power. Most private workplace pensions, SIPPs (self-invested personal pensions), and stakeholder pensions operate this way. You complete an expression of wish form, but trustees can pay benefits to someone else if they determine another person has a stronger claim.

Non-discretionary schemes make your nomination legally binding. Some public sector schemes and older occupational pensions work this way. When you nominate a beneficiary, that's who receives the death benefits—trustees have no discretion to override your choice.

Emma, 49, NHS nurse, Manchester has an NHS Pension Scheme, which is non-discretionary for certain benefits. Her nominated beneficiary (her sister) must receive the death benefits. Emma's scheme rules state this clearly, giving her certainty about where her pension will go.

James, 55, accountant, Birmingham has a SIPP, which is discretionary. James names his partner in an expression of wish form. Trustees could pay to someone else if they determine his partner wasn't financially dependent and James has adult children who were dependent. This discretion is why James needs to update his form regularly and document his partner's financial dependency.

Comparison: Discretionary vs. Non-Discretionary

Feature Discretionary Non-Discretionary
Who decides beneficiaries Trustees exercise discretion Member's nomination is binding
Is nomination binding? No (advisory only) Yes (must be followed)
Current IHT treatment Usually outside estate May be inside estate
Post-2027 IHT treatment Included in estate Included in estate
Typical schemes Workplace DC pensions, SIPPs, stakeholder Some public sector DB schemes

Under current law, discretionary schemes typically keep pensions outside your estate for inheritance tax because trustees—not you—control the distribution. Non-discretionary schemes where you control the nomination may already be included in your estate for inheritance tax purposes.

From April 2027, this distinction becomes less relevant for inheritance tax. Both types will be included in your estate value regardless of who makes the final distribution decision.

Trustees in discretionary schemes aren't unlimited in their discretion. They must act reasonably, consider your stated wishes, and follow scheme rules. If they don't, beneficiaries can challenge their decisions—though this is expensive and difficult in practice.

Check your scheme rules or ask your pension provider to determine which type you have. The answer affects how certain you can be about who receives your pension and how to coordinate your estate planning.

Expression of Wish Forms: The "Pension Will" You Didn't Know You Needed

An expression of wish form tells your pension trustees who you want to receive your death benefits. For discretionary schemes, it's not legally binding—but trustees usually follow it. For most people, it's the only way to communicate your intentions about £100,000+ of wealth.

72% of UK adults have failed to complete an expression of wish form. This means nearly three-quarters of pension holders leave their trustees to investigate and decide without any guidance. The consequences range from delays to beneficiaries receiving nothing.

How to complete an expression of wish form:

  1. Contact each pension provider separately (there's no central registry)
  2. Request the form (many providers offer online submission now)
  3. Provide full names, dates of birth, and addresses of beneficiaries
  4. Specify percentage splits if naming multiple beneficiaries (e.g., 50% to spouse, 25% to each child)
  5. Sign and date the form
  6. Send it back to your provider
  7. Keep a copy with your will documents

When to update your expression of wish form:

  • After divorce or separation
  • After marriage or civil partnership
  • When children are born or adopted
  • If a named beneficiary dies
  • When relationships change significantly
  • Every 2-3 years as a routine review

Robert, 61, divorced, London completed an expression of wish form in 2005 naming his then-wife. He divorced in 2012 and remarried in 2015 but never updated the form. When he died in 2024, trustees followed the outdated 2005 form and paid £350,000 to his first wife. His current wife and stepchildren received nothing from his pension. A 10-minute form update would have prevented this outcome.

Lisa, 48, single parent, Glasgow names three beneficiaries: her two adult children (40% each) and her sister (20%). She specifies percentages clearly. When she dies, trustees don't need to guess how to split her £180,000 pot—the percentages make her intentions explicit.

What happens without an expression of wish form? Trustees conduct their own investigation. They review your circumstances, identify potential beneficiaries, consider financial dependency, and make a decision. This process can take months and may result in benefits going to people you wouldn't have chosen.

Vague language creates problems. "Share between my children" doesn't specify percentages if you have three children. Does each get a third? What if one child was financially dependent and the others weren't? Clear percentages eliminate ambiguity.

Critical point: Expression of wish forms are separate from your will. Your will governs your estate (house, savings, investments). Expression of wish forms govern your pension. Both documents need to work together as part of your overall plan, but they're legally distinct.

If you have multiple pensions—common if you've changed jobs several times—you need a separate expression of wish form for each scheme. One form doesn't cover all your pensions. Track down every pension (use the Pension Tracing Service if needed) and complete forms for each.

When Pensions DO Form Part of Your Estate (Current Exceptions)

While most pensions sit outside your estate under current law, specific circumstances already bring them inside your estate for inheritance tax—even before the 2027 changes take effect.

Exception 1: No expression of wish and no dependants

If you don't complete an expression of wish form and have no living dependants (spouse, civil partner, financially dependent children), trustees typically pay your pension to your estate. Once it's paid to your estate, it becomes subject to inheritance tax and probate like any other asset.

Thomas, 70, widowed, no children, Cardiff had a £95,000 pension pot but never completed an expression of wish form. He had no living dependants. Trustees paid the £95,000 to his estate. Combined with his £280,000 house and £40,000 savings (total estate: £415,000), this triggered inheritance tax on the amount over the £325,000 nil-rate band.

Exception 2: Non-discretionary schemes with binding nominations

Some non-discretionary schemes treat nominated benefits as part of your estate because you control who receives them. If the nomination functions like a will provision (legally binding on trustees), HMRC may include it in your taxable estate.

Exception 3: Deliberate deprivation—transfers while in poor health

If you transfer pension funds or make nominations while seriously ill with the intention of avoiding inheritance tax, HMRC can investigate under deliberate deprivation rules. Pension transfers in the last two years before death while in poor health face particular scrutiny.

Margaret, 68, terminal diagnosis, Edinburgh transferred £200,000 from her pension to a trust eight months before dying. HMRC investigated and included the pension transfer in her assessable estate for inheritance tax because she was in poor health and the transfer was clearly designed to avoid IHT. Her estate faced the tax bill she'd tried to avoid.

Exception 4: Small pensions paid to estates without probate

The Administration of Estates (Small Payments) Act 1965 allows small pension amounts (typically under £5,000-£10,000 depending on the scheme) to be paid to estates without requiring full probate. These payments are included in the estate value.

HMRC's two-year lookback period for health-related transfers means they examine whether you were in good health when making pension planning decisions. If you transferred significant pension funds while seriously ill, expect questions from HMRC about your motives and health status.

What counts as "no dependants"? No spouse or civil partner, no children under 23, no disabled children of any age, and no other relatives financially dependent on you. If you're widowed, divorced, or never married with adult independent children, you may fall into this category.

State pension exception: Your state pension dies with you (no death benefit in the traditional sense). Certain widow's pensions and bereavement benefits exist, but there's no lump sum to pass on or include in your estate.

These current exceptions mean some pensions are already subject to inheritance tax. The 2027 changes will make this universal rather than exceptional.

The 2027 Inheritance Tax Changes: What's Actually Changing

Chancellor Rachel Reeves announced fundamental changes to pension taxation in the Autumn Budget 2024. From 6 April 2027, all unused pension funds and death benefits will be included in your estate for inheritance tax purposes.

This applies regardless of whether your pension scheme is discretionary or non-discretionary. The discretion that currently keeps most pensions outside your estate becomes irrelevant for inheritance tax calculations after April 2027.

The government estimates 10,500 estates (1.5% of UK deaths) will become liable for inheritance tax where they weren't previously. Another 38,500 estates will pay more inheritance tax than they would have under current rules.

Personal representatives (your executors) become responsible for reporting and paying inheritance tax on pensions. Previously, pension schemes operated independently of probate. After 2027, executors must coordinate with pension trustees to ensure inheritance tax is paid before beneficiaries receive funds.

Andrew, 64, dies January 2026 (before changes): His £400,000 pension pot sits outside his estate. His estate (house plus savings = £500,000) is below the £650,000 married couple allowance (he's married and can use his late wife's unused nil-rate band). Total inheritance tax: £0.

Andrew, 64, dies May 2027 (after changes): Same facts, but now his £400,000 pension is included in the estate. Total estate: £900,000. After the £650,000 allowance, £250,000 is taxable at 40% = £100,000 inheritance tax bill. His executors must coordinate with pension trustees to pay this before beneficiaries receive pension funds.

Impact table: Before and After 2027

Estate Value (excluding pension) Pension Value Pre-2027 IHT Post-2027 IHT Increase
£300,000 £200,000 £0 £0 £0
£400,000 £300,000 £30,000 £60,000 £30,000
£600,000 £400,000 £110,000 £270,000 £160,000
£800,000 £500,000 £190,000 £520,000 £330,000

Assumes single person with £325,000 nil-rate band. Married couples can use £650,000 with transferable allowances.

What counts as "unused pension funds"? Any pension pot not yet paid out as benefits. Defined contribution pots, drawdown funds not yet drawn, and scheme pensions not yet in payment all count as unused.

Key exemptions remain:

  • Spouse and civil partner transfers (no inheritance tax when you leave pensions to your spouse/civil partner)
  • Charity gifts (pensions left to registered charities are exempt)
  • Death in service benefits (lump sum multiples of salary paid by employer schemes are excluded from the 2027 changes)

The 50% withholding mechanism: Executors can ask pension trustees to withhold up to 50% of death benefits for up to 15 months. This ensures money is available to pay inheritance tax without executors needing to find cash from other sources.

Inheritance tax nil-rate band remains £325,000 for individuals or £650,000 for married couples/civil partners using the transferable allowance. The residence nil-rate band (additional £175,000 when passing your home to direct descendants) adds complexity but can increase the total threshold to £500,000 individually or £1 million for couples.

The average inheritance tax increase is £34,000 when pension assets are included in estate valuations. This represents a significant additional cost for families with substantial pension pots and other assets pushing them over the nil-rate band threshold.

Tax Treatment of Pension Death Benefits (Before and After Age 75)

Inheritance tax is separate from income tax on death benefits. Even after the 2027 changes, your beneficiaries may face both taxes depending on your age at death and how they take the benefits.

Age 75 is the critical threshold for income tax treatment of pension death benefits.

Death before age 75: Benefits are usually paid tax-free to your beneficiaries, provided they're paid within two years of the scheme learning of your death. This applies to lump sums, drawdown funds, and scheme pensions.

Death at or after age 75: Beneficiaries pay income tax at their marginal rate on any pension payments they receive. There's no two-year deadline, but the tax is unavoidable.

The Lump Sum and Death Benefit Allowance (LSDBA) is £1,073,100. This counts all tax-free lump sums you took during life plus death benefits. If the total exceeds £1,073,100, the excess is taxed even if you died before 75.

Sophie, 68, dies with £320,000 pension: Her husband receives the £320,000 lump sum tax-free. Payment occurred within two years of her death, she died before 75, and the amount is below the LSDBA. He pays £0 income tax. (Note: from 2027, the estate may owe inheritance tax depending on total estate value, but that's separate from income tax on the beneficiary.)

George, 78, dies with £280,000 pension: His daughter inherits and takes £280,000 as a lump sum. She's a higher-rate taxpayer (40% bracket). She pays £112,000 income tax on the lump sum, netting £168,000.

Smart alternative for George's daughter: Instead of taking a lump sum, she moves £280,000 into beneficiary's drawdown. She withdraws £30,000 per year for nine years. Spreading withdrawals over multiple tax years keeps some withdrawals in her basic-rate band (20%), saving approximately £40,000 in income tax compared to taking the full lump sum at 40%.

Dependant's scheme pensions are always taxed as income regardless of your age at death. If your widow receives a guaranteed income from your defined benefit pension, she pays income tax on those payments even if you died before 75.

The two-year rule explained: The clock starts when your pension scheme learns of your death (not the date of death itself). If your family notifies the scheme six months after your death, the two-year period runs from that notification date. Benefits paid after the two-year window lose their tax-free status even if you died before 75.

Reference GOV.UK guidance on death benefits taxation for complete technical details on how age 75 affects tax treatment.

Beneficiary's drawdown offers significant tax advantages for beneficiaries of members who died at or after age 75. Instead of taking a taxable lump sum, beneficiaries leave funds in the pension wrapper and draw income as needed. This spreads the tax liability across multiple years and allows remaining funds to grow tax-free.

Successive beneficiaries: If your beneficiary dies before taking all the pension, the next generation can inherit. If your beneficiary died before 75, the next generation can inherit tax-free. If your beneficiary died at or after 75, the next generation pays income tax on what they receive.

Age 75 is a critical planning milestone. If you're approaching 75 with a large pension pot you don't need for retirement income, consider whether to draw down some funds before 75. Money you draw and gift to family or spend before you die avoids both the age 75 income tax threshold and the 2027 inheritance tax inclusion.

Coordinating Your Pension and Will: Practical Steps

Your pension and your will work as parallel parts of your estate plan. Neither document controls the other, but both need to align to achieve your overall goals.

Step 1: Identify all your pensions

List every pension you have: workplace pensions (current and previous), SIPPs, stakeholder pensions, and older personal pensions. Use the Pension Tracing Service at GOV.UK to find pensions from jobs you've forgotten about.

Step 2: Request and complete expression of wish forms

Contact each pension provider separately. Download forms from their websites or call customer service. Complete a separate form for each pension—one form doesn't cover multiple schemes.

Step 3: Calculate total estate value including pensions

Add your pension values to your other assets (property, savings, investments). This gives you your estimated estate value for post-2027 inheritance tax calculations. If the total exceeds £325,000 (single) or £650,000 (married/civil partners), you may face inheritance tax liability after April 2027.

Step 4: Review your will for coordination

Check whether your will beneficiaries match your pension beneficiaries. If your will leaves everything to your children but your pension expression of wish form names your spouse, your family receives a lopsided inheritance. Intentional differences are fine—just ensure they're deliberate, not accidental.

Step 5: Consider drawdown vs. leaving for beneficiaries

If you're in retirement with more pension than you need, evaluate whether to draw funds now (reducing your future estate value) or leave the pot untouched for beneficiaries (who'll face income tax and potentially inheritance tax). There's no universally correct answer—it depends on your spending needs, tax position, and family circumstances.

Step 6: Set calendar reminders for reviews

Add a recurring reminder every 2-3 years to review expression of wish forms. Also review after major life events: divorce, remarriage, births, deaths of beneficiaries.

Patricia, 56, pharmacist, Nottingham has £380,000 in pensions and £420,000 in other assets (total: £800,000). She's married. She names her husband in her expression of wish forms and in her will. Her will includes a note: "My pension death benefits are governed by separate expression of wish forms held with each pension provider." This prevents executor confusion about where the pension goes.

Richard, 72, retired engineer, Liverpool has a £450,000 pension. He calculates that if he dies after April 2027, his estate (total £850,000 with pension) would face a £50,000 inheritance tax bill. He begins drawing £30,000 per year from his pension to spend and gift to family, reducing the pot that will be included in his estate while improving his retirement lifestyle.

Keep a master list: Create a document listing all your pensions with policy numbers, provider contact details, and beneficiary nominations. Store this with your will so executors can quickly identify what pensions exist and who should receive them.

Consider professional advice: If your estate will substantially exceed the inheritance tax threshold after 2027, consult a financial adviser regulated by the Financial Conduct Authority or a solicitor specializing in estate planning. Complex estates with business interests, international property, or significant pension wealth benefit from expert tax planning guidance.

Your will should reference your pension planning even though pensions don't pass through your will. A simple note like "I have made separate beneficiary nominations for my pension schemes" helps executors understand the full picture without creating confusion about what the will controls.

Common Mistakes That Cost Beneficiaries Thousands

The most expensive pension planning mistakes are also the most common. Here's what goes wrong and what it costs families.

Mistake 1: Never completing expression of wish forms

72% of UK adults haven't completed an expression of wish form. Without one, trustees investigate your circumstances and make their own decision. This causes delays (months or years), increases the chance of benefits going to unintended recipients, and can result in pensions being paid to your estate where they face inheritance tax.

Cost: Months of delays, potential inheritance tax on pensions paid to estates, family conflicts over trustee decisions.

Mistake 2: Naming ex-partners and never updating after divorce

Divorce doesn't automatically invalidate your expression of wish form. If your form names your ex-spouse from 15 years ago and you've remarried, trustees may follow the old form.

Kevin, 59, divorced 2016, remarried 2018, dies 2024: Kevin's 2010 expression of wish form still names his first wife. Trustees follow the form and pay £290,000 to his ex-wife. His current wife challenges this but has no legal standing (discretionary scheme, trustees acted reasonably based on available documentation). Legal fees: £18,000. Outcome: Ex-wife keeps the pension.

Cost: Entire pension to ex-partner, legal fees if challenged, family breakdown.

Mistake 3: Not coordinating pension beneficiaries with will beneficiaries

Your will leaves everything equally to your three children. Your expression of wish form names only your eldest son (written 15 years ago when he was your only child). Trustees pay the pension to your eldest son. Your other two children split the house and savings but receive nothing from the pension.

Rachel, 51, dies 2024: Her will says "everything equally to my three children." Her expression of wish form names only her eldest son (written before the other two were born). Trustees pay £220,000 pension to eldest son only. The other two children receive house and savings split three ways. Family relationships destroyed over unintentional unequal inheritance.

Cost: Family conflicts, unequal inheritance, potential legal challenges, destroyed relationships.

Mistake 4: Failing to consider age 75 tax implications

You plan to leave your pension untouched for your children as inheritance. You don't draw any pension income because you don't need it—you have other retirement income. If you die after age 75, your children pay income tax at potentially 40% on everything they inherit.

Colin, 74, in good health: Colin plans to leave his £380,000 pension untouched for his children. He turns 75 next month. If he dies after 75, his children pay income tax at their marginal rates (potentially 40% = £152,000 tax). If he'd drawn down some pension before 75, he could have passed it to them during life (via gifts outside the inheritance tax seven-year rule) or they could have inherited with better tax treatment.

Cost: £50,000-£150,000+ in income tax for beneficiaries depending on their tax brackets and pension size.

Mistake 5: Assuming "spouse gets everything" without explicit nominations

Many people assume their spouse automatically inherits everything, including pensions. For discretionary schemes, this isn't guaranteed. Trustees decide based on financial dependency and other factors. Without an expression of wish form explicitly naming your spouse, you leave the decision to trustees.

Cost: Potential for pension going to adult children or estate instead of spouse, delays while trustees investigate, family conflicts about who has the strongest claim.

Mistake 6: Vague nominations without percentages

"Share between my children" creates problems if you have three children and a £240,000 pension. Does each get £80,000? What if one child was financially dependent and the others weren't? Should dependency affect the split? Trustees face impossible decisions without clear guidance.

Cost: Months of delays, potential legal disputes between siblings, trustee decisions that don't match your intentions.

Mistake 7: Not calculating 2027 inheritance tax impact

You know your estate is worth £550,000, which is below the £650,000 married couple threshold (you're married). You think there's no inheritance tax. You've forgotten to include your £300,000 pension. After April 2027, your total estate is £850,000, triggering £80,000 in inheritance tax.

Cost: £34,000 average inheritance tax increase (government estimate), or much more for larger estates with substantial pension pots.

These mistakes are preventable. Updating expression of wish forms takes 10 minutes per pension. Calculating your total estate value (including pensions) takes an hour. Coordinating your pension nominations with your will takes a single conversation with your spouse or family about your intentions.

Frequently Asked Questions

Q: Does my pension form part of my estate when I die?

A: Currently, most pensions do not form part of your estate because they're held in discretionary trusts where pension scheme trustees decide who receives death benefits. However, from 6 April 2027, unused pension funds and death benefits will be included in your estate for inheritance tax purposes, regardless of whether the scheme is discretionary.

Q: What happens to my pension if I don't nominate a beneficiary?

A: If you don't complete an expression of wish form and have no dependants, your pension will likely be paid to your estate. This means it could be subject to inheritance tax and delay in probate. Currently, 72% of UK adults haven't completed an expression of wish form, potentially causing unintended consequences for their loved ones.

Q: Are pensions subject to inheritance tax in the UK?

A: Currently, pensions held in discretionary trusts are generally exempt from inheritance tax. From 6 April 2027, all unused pension funds and death benefits will be included in your estate for inheritance tax purposes. The government estimates this will affect approximately 10,500 estates (1.5% of UK deaths) that weren't previously liable.

Q: How are pension death benefits taxed?

A: If you die before age 75, death benefits are usually paid tax-free to your beneficiaries (provided they're paid within two years). If you die at age 75 or over, beneficiaries pay income tax at their marginal rate on any pension payments they receive. From April 2027, inheritance tax may also apply.

Q: What is an expression of wish form and why is it important?

A: An expression of wish form (also called a beneficiary nomination form) tells your pension trustees who you want to receive your pension death benefits. While not legally binding, trustees usually follow your wishes. Without one, decisions are made by trustees without your input, potentially resulting in benefits going to unintended recipients like ex-partners.

Q: Will the 2027 pension inheritance tax changes affect me?

A: The 2027 changes will affect estates with significant unused pension funds that exceed the inheritance tax nil-rate band (£325,000, or £650,000 for married couples/civil partners). The government estimates approximately 38,500 estates will pay more inheritance tax, with an average increase of £34,000.

Q: Do I need to include my pension in my will?

A: No, your pension does not go through your will because it sits outside your estate (until 2027 changes take effect). Instead, use an expression of wish form to direct your pension trustees. However, your will should coordinate with your pension planning to ensure your overall estate plan reflects your wishes.

Conclusion

Understanding whether your pension forms part of your estate is critical for protecting your family from unexpected tax bills and delays. Under current rules, most pensions sit outside your estate in discretionary trusts—but only if you've completed expression of wish forms to guide trustees. From April 2027, the landscape changes dramatically: all unused pension funds will be included in your estate for inheritance tax purposes.

Key takeaways:

  • Complete expression of wish forms for every pension you hold (72% of adults haven't done this)
  • Update forms after divorce, marriage, births, or deaths in the family
  • Calculate your total estate value including pensions to estimate 2027 inheritance tax impact
  • Coordinate pension beneficiaries with your will beneficiaries to avoid family conflicts
  • Consider drawing pension income if you're approaching age 75 and don't need to preserve the pot
  • Review your planning every 2-3 years as legislation and circumstances change

Your pension is likely one of your largest assets—often worth more than your house. While it doesn't pass through your will, it absolutely requires the same level of careful planning. The 2027 changes mean coordination between your pension nominations and your will has never been more important.

Michael's family from our opening example spent 14 months navigating trustee decisions about his £420,000 pension because he'd never updated his expression of wish form. His widow Claire received the funds eventually—but the stress, uncertainty, and family disagreements during that time were entirely preventable. Don't leave your family guessing about your wishes when two simple documents (your will and your expression of wish forms) can provide complete clarity.

Need Help with Your Will?

Understanding how pensions interact with your estate is essential for creating a comprehensive will that protects your family. The guidance above helps you coordinate your pension planning with your will to ensure everything works together before the 2027 changes take effect.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete will (legally binding when properly executed and witnessed) plus three expert guides. Preview your will free before paying anything—no credit card required.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

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