Death benefit nominations explained

When a member of a defined contribution pension dies, any funds remaining in the pension can be passed on to their beneficiaries. Death benefit nominations help the scheme determine who these beneficiaries should be, and give them the option of receiving the benefits as a pension income.

As part of our Bitesize Technical series, Senior Technical Consultant Lisa Webster looks at how the rules around nominations work.

Please note: These are the current rules for pension death benefits. Changes to the tax treatment are due to come into force from 6 April 2027.

Key insights on death benefit nominations

Who can receive funds left in a pension following the member’s death??

Any funds left in the pension on death can be passed on to virtually anyone. As well as being paid to individual people, benefits can also go into a trust, or to a charity.

How can death benefits be paid?

Death benefits can also be used to provide a pension for certain beneficiaries, in the form of an annuity or a drawdown pension.

Only individuals can receive the death benefits as a pension; it is not possible for a pension income to be paid to a trust or charity.

Which beneficiaries are eligible to receive death benefits as pension income?

Beneficiaries must be either dependants or nominees to be eligible to receive the death benefits as pension income.

Who are classed as dependants?

A dependant of the member is their spouse or civil partner, any child under the age of 23, and an older child if they were dependent on the member at the date of death due to physical or mental impairment.

Other people will also be classed as dependants if, in the scheme administrator’s opinion, they were financially dependent on the member, dependent on the member due to physical or mental impairment, or in a financial relationship of mutual dependence.

Who can be a nominee?

As well as dependants, members can make nominations to leave their pension to anyone they like. The only circumstance where the scheme administrator can make a nomination is where the member has no surviving dependants, and they made no nomination.

What happens when a beneficiary dies?

If a dependant or nominee dies with funds remaining in the pension on their death, the funds can be passed on again. The dependant or nominee can make a nomination, and when death benefits are passed on again, these second beneficiaries are known as successors. Successors also have the option of using the funds to take drawdown, and these can be passed on to further successors on their death. There is no limit to how many times funds can be passed on.

More Bitesize Technical

Get your teeth into ‘How trustees exercise discretion, explained’ – the next instalment of our pension death benefits Bitesize Technical series.