Inheriting pension rights
This briefing outlines the different arrangements for inheriting pension rights in State and private pension schemes.
Pension rights refer to someone’s entitlements from the state pension or a pension scheme. These include the pension income or savings someone has built up.
How and if pension rights are inherited depends on the type of pension involved.
State Pensions Old State PensionThe old State Pension covers people who reached State Pension age before 6 April 2016. The old State Pension consists of two tiers:
- the basic State Pension is paid at a flat rate to people who have built up the required number of “qualifying years” in National Insurance contributions or credits – their contribution record.
- the additional State Pension, which is related to the amount people earned.
People’s entitlement to the basic State Pension can be based on the contribution record of their late spouse or civil partner.
It is also possible for a spouse or civil partner to inherit an additional State Pension. The amount that can be inherited depends on when the person died and their date of birth.
New State PensionThe new State Pension was introduced for people reaching State Pension age from 6 April 2016. It consists of a single tier and is linked to someone’s National Insurance record, not their earnings.
The introduction of the new State Pension ended most people’s ability to inherit or base their State Pension on their spouse or civil partner’s entitlement, although there are limited transitional protections.
Private pensionsPrivate pensions are separate to the State Pension. Private pensions include workplace pension schemes and personal pension schemes which people set up on their own.
When a member of a pension scheme dies, how the pension is inherited depends on the type of pension scheme, the age of the member when they died, and the rules of that scheme.
Defined contribution schemesDefined contribution schemes build up a pension pot for retirement, which people nominated by the deceased can inherit. They can usually receive the inheritance as a lump sum or to set up a guaranteed income. They may also have the option to access the pension through flexible drawdown.
Defined benefit schemesDefined benefit schemes pay a promised income for life and may include a retirement lump sum. Each scheme has different rules for what a member’s beneficiaries might receive when they die. Most defined benefit schemes provide pension benefits to surviving spouses, civil partners, and dependent children. Someone receiving an income from an inherited pension pays tax under normal income tax rules.
Where to find support GuidanceFurther guidance is available from MoneyHelper’s What happens to my pension when I die? MoneyHelper also has a factsheet on State Pension death benefits.
MoneyHelper, which is supported by the Department for Work and Pensions, also provides free pensions guidance.
AdviceAdvice on non-state pensions can only be provided by firms which are regulated by the Financial Conduct Authority and on the Financial Services Register. MoneyHelper has published a guide on choosing a financial adviser.
State pensionsThe Pension Service provides information about people’s entitlements to their State Pension, including what they can claim in relation to a deceased spouse or civil partner’s basic or additional State Pension.
Contact details for organisations providing free advice on State Pensions and pensioner benefits can be found using the AdviceLocal postcode finder.
Pension taxGov.uk provides a summary Tax on a private pension you inherit.