Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Death benefits definition

What does Death benefits mean? Death benefits are payments or entitlements triggered by a member’s death under an occupational or personal pension scheme, or a death-in-service life policy. They commonly take the form of a lump sum death benefit, a survivors’/dependants’ pension (for a spouse, civil partner or children), or a refund of contributions or AVCs. The phrase is descriptive across pensions and life assurance; specific categories (for example, lump sum death benefit) are defined in UK and Irish tax legislation and guidance. Eligibility, form and amount are determined by the scheme’s trust deed and rules or contract terms, subject to overriding pensions and...

Death benefits in UK registered money purchase occupational pension schemes: authorised forms (lump sums, annuities, drawdown) and tax (2024 allowances) plus IHT reforms from April 2027

Published by a LexisNexis Pensions expert

Practice notes

FORTHCOMING CHANGE:

Under the Finance Bill 2025–26, unused pension pots and death benefits will also be treated as part of a deceased member’s estate, bringing them into the inheritance tax (IHT) net from 6 April 2027.

These rules will not cover death-in-service payouts to active employees in relevant employment, nor a dependant’s scheme pension (that is, a DB scheme spouse’s or dependant’s pension).

Existing exemptions, including those for spouses and civil partners, will continue to apply unchanged.

Responsibility for settling any IHT will rest chiefly with the personal representatives in the first instance.

For more detail, consult Practice Note: Inheritance tax and pensions; News Analyses: HMRC—Reforming inheritance tax—unused pension funds and death benefits; HMRC confirms new IHT rules on unused pension funds to apply from 6 April 2027; and HMRC policy paper: Inheritance Tax: unused pension funds and death benefits (November 2025).

THIS PRACTICE NOTE RELATES ONLY TO REGISTERED money PURCHASE OCCUPATIONAL PENSION SCHEMES

Most pension arrangements generally offer benefits payable on a member’s death...

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Web page updated on 21/05/2026

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