Skip to content

Defined Contribution Pension

A defined contribution (DC) pension is any pension where the eventual benefit depends on what has been paid in and how the underlying investments have performed, rather than on a salary-linked formula. The category covers personal pensions, stakeholder pensions, self-invested personal pensions (SIPPs), and the bulk of modern workplace auto-enrolment schemes. The pot is the member's own money held in a tax-advantaged wrapper.

When the member dies, the death benefit is the value of whatever remains in the pot at the date of death (or the date the provider is notified, depending on scheme rules). The provider pays this to whoever the member named on a nomination form, or, where no nomination is on file, to whomever the trustees decide under the scheme's discretionary powers.

Tax treatment hinges on the member's age at death:

  • Death before age 75: the lump sum is normally paid free of Income Tax, subject to the deceased's lump sum and death benefit allowance. The recipient can take it as cash or roll it into their own pension and draw it down over time. [source: gov-uk/tax-on-pension-death-benefits-2026-04-29.html]
  • Death on or after age 75: the lump sum is taxable as income at the recipient's marginal rate, deducted at source by the pension provider. [source: gov-uk/tax-on-pension-death-benefits-2026-04-29.html]

The age-75 rule is absolute. A member who dies a day before their 75th birthday leaves a tax-free death benefit (within the allowance); a day after, it is fully taxable. The same age threshold applies to annuities and drawdown income inherited by a beneficiary. [source: gov-uk/tax-on-pension-death-benefits-2026-04-29.html]

A DC pension paid at trustee discretion under a nomination form sits outside the deceased's estate and is not counted towards the nil-rate band for inheritance tax. A pension paid directly to the estate (because no nomination is on file and the trustees decide that way, or because the scheme has no discretion) does count, and can pull an otherwise inheritance-tax-free estate over the threshold.

→ Pensions after a death

Last verified: 29 April 2026 against gov.uk/tax-on-pension-death-benefits.