Frozen Pension on Death: What Happens to a Deferred Pension?

Defined benefit vs defined contribution

The two main types of pension scheme have very different rules on death:

Defined benefit (DB) schemes

In a defined benefit (final salary or career average) scheme, the benefit on death before retirement typically includes:

• A dependant's pension: Usually 50% or two-thirds of the preserved pension, paid to a surviving spouse, civil partner, or qualifying dependant for life
• A lump sum: Some DB schemes pay a lump sum on death in deferment — check the scheme rules; this may be based on the transfer value, the value of the preserved pension, or 5 × the preserved pension
• Member contributions refund: Older schemes may only pay back the member's own contributions with interest if there is no dependant

The scheme rules govern everything. The executor should contact the scheme administrators (the trustees) as soon as possible to establish what is payable and to whom.

Defined contribution (DC) schemes

In a defined contribution scheme (including personal pensions and SIPPs), the fund has a definite cash value. On death before retirement:

• The fund is paid to the nominated beneficiary — the person the member nominated on an expression of wishes form
• If there is no valid nomination, the trustees exercise their discretion to pay to dependants or the estate
• If the fund is paid to a nominated individual (not the estate), it is generally outside the deceased's estate for IHT purposes

This outside-estate treatment is extremely valuable. Executors should locate all expression of wishes forms and contact all DC schemes.

Pensions and inheritance tax

Most pension funds (DC schemes) paid to a nominated beneficiary bypass the estate and are not subject to IHT. This has historically been a significant IHT planning tool.

However, the 2024 Autumn Budget announced that from April 2027, unused pension funds will be included in the estate for IHT. This is a major change that affects planning for current and future deaths. For full context, see our inheritance tax UK 2026–27 guide.

For deaths before April 2027, the existing rules apply — DC pensions paid to nominated beneficiaries are outside the estate.

Tracing old pensions

Many people have deferred pensions from former employers that they have lost track of. The Pension Tracing Service (GOV.UK) provides a free service to trace pension schemes using the employer's name. Executors should use this service if there is any suggestion that the deceased worked for multiple employers over their career.

Practical steps for the executor

1. Trace all pension schemes — check payslips, P60s, letters, and use the Pension Tracing Service
2. Contact each scheme administrator with the death certificate
3. Ask for details of the death benefit and who is entitled to receive it
4. Locate expression of wishes/nomination forms for DC schemes
5. For DB schemes, ask for a statement of the preserved pension and the death benefits
6. Understand whether the benefits are inside or outside the estate for IHT purposes

For a guide to claiming private and workplace pensions generally, see our guide to claiming pensions after death. For related pension/annuity topics, see our annuity on death guide and overpaid pension guide. For general estate administration, see the estate administration checklist, complete UK probate guide 2026, and applying for probate. For the IHT400, see our IHT400 guide. For executor first steps, see our executor first steps guide. For collecting all assets after probate, see our collecting assets after probate guide. Farra can help — get started here.