Farra is a death administration assistant for UK families. Get step-by-step guidance for registering a death, applying for probate, notifying banks, and managing bereavement admin. From essential documents to practical checklists, Farra simplifies estate paperwork and funeral-related tasks so you can focus on what matters.
Pensions are one of the most complex assets to deal with in estate administration. Most pensions fall outside the estate and are not subject to inheritance tax — but the rules are changing significantly from April 2027. This guide explains the current position, how to value different types of pension, and how to report them correctly. For an overview of all assets to value, see our executor first steps guide.
Most UK pension death benefits are paid at somebody's discretion, which is why the fund does not pass under the deceased's will and is not part of the probate estate. Who holds that discretion depends on the scheme. In a trust-based occupational scheme or a master trust such as Nest it is the trustees. In a personal pension or SIPP there are no separate trustees — the provider decides as scheme administrator. In the statutory public service schemes (NHS, Teachers', Police, Armed Forces, Civil Service) there is no discretionary trust at all: the benefit is paid under scheme regulations, and a valid nomination can bind the scheme. Whoever decides is guided by:
Because discretionary pension benefits do not form part of the estate, they are currently (pre-April 2027) outside the scope of IHT and do not need to be reported on IHT400 for most purposes. This is one of the reasons pensions have been used extensively in IHT planning.
Important: For deaths on or after 6 April 2027, undrawn pension funds and death benefits fall within the scope of inheritance tax. This is settled law, not a proposal — the charge is in sections 66 to 71 of the Finance Act 2026. HMRC's policy paper of 26 November 2025 states that personal representatives will be liable for reporting and paying any Inheritance Tax due on unused pension funds and pension death benefits, and that they can direct a scheme administrator to withhold up to 50% of the death benefits for up to 15 months from the date of death while the tax is settled. Two things stay outside the charge: all death in service benefits payable from a registered pension scheme, and dependants' scheme pensions from a defined benefit or collective money purchase arrangement. The spouse, civil partner and charity exemptions are kept.
Certain pension death benefits are included in the estate and must be reported on IHT400:
If in doubt about whether a pension falls into the estate, ask the scheme in writing for a copy of the rules governing death benefits and for confirmation of whether the benefit is discretionary or binding. The answer turns on the scheme's own rules, not on a general rule about pensions.
A defined contribution pension (including personal pensions, SIPPs, and workplace money purchase schemes) has a fund value at any given point. To value it:
Even if the pension falls outside the estate for IHT purposes, you will need this information for the estate accounts and to assist beneficiaries in claiming. See our guide to collecting a pension death benefit as executor.
A defined benefit (final salary or career average) pension provides a guaranteed income in retirement. The death benefits from a DB scheme can be complex:
| Death Benefit Type | What It Is | IHT Treatment |
|---|---|---|
| Death in service lump sum | A lump sum paid on death in service. The multiple of salary varies by scheme and by scheme section — ask the scheme administrator; there is no standard figure | Outside the estate where the payment is discretionary, and specifically excluded from the April 2027 change |
| Spouse's pension | Ongoing pension paid to surviving spouse — belongs to spouse, not estate | Outside estate — belongs to spouse |
| Dependants' pension | Ongoing pension for dependent children or other dependants | Outside the estate. Dependants' scheme pensions from a defined benefit or collective money purchase arrangement are also excluded from the April 2027 change |
| Pension guarantee lump sum | Remaining guaranteed pension payments paid as a lump sum | May be in estate depending on scheme rules |
Contact the DB scheme administrator and request a letter setting out all death benefits payable, their values, and confirmation of discretionary or binding nature. This is required for the executor's records even where the benefits are outside the estate.
State pension is not an asset that passes on death — it simply stops. The executor must notify the Pension Service as soon as possible to prevent overpayments, which will need to be repaid. Any overpayment already made is a debt of the estate.
A surviving spouse may be entitled to bereavement benefits or an uplift in their own state pension based on the deceased's National Insurance record. This is separate from the estate administration and the surviving spouse should contact the Pension Service directly.
If the pension forms part of the estate (see above), it is reported on Schedule IHT409, "Inheritance Tax: pensions", which HMRC requires wherever the deceased received or had made arrangements to receive a pension other than the State Pension. Even if the pension is outside the estate, HMRC asks in IHT400 whether the deceased had any pension arrangements — you must answer this honestly and explain why the pension is excluded from the estate.
For a full guide to completing IHT400, see our IHT400 form guide. For the overall inheritance tax position, see our inheritance tax guide for 2026–27.