Pension and Life Insurance Beneficiaries
Your pension is probably your largest asset. It almost certainly does not pass through your will.
This page covers general information about pension death benefits and life insurance. It is not financial advice. Rules and legislation change. Always consult a qualified independent financial adviser for guidance specific to your situation.
Part 1: Pension Beneficiaries
The most common mistake in estate planning
Most people assume that when they die, everything they own passes according to their will. For bank accounts, property, and ISAs, that is broadly true. For pensions, it is not.
Pensions sit outside your estate for inheritance purposes. This has significant tax advantages, covered in the inheritance tax guide, but it also means your will has no authority over who receives your pension when you die. That decision is guided by a form you may not have filled in, or may not have updated in years.
How pension death benefits work
When you die with money remaining in a pension, the pension provider has discretion over who receives it. They take their guidance from a document called an expression of wishes, sometimes called a nomination of beneficiaries form.
This form is not legally binding. The pension provider retains discretion, partly for tax reasons. In practice, providers follow the nomination in the vast majority of cases unless there is a clear reason not to.
If you have not filled in a nomination form
The pension provider will use their own discretion. They may contact your estate or known family members. The process takes longer, causes more stress for your family at an already difficult time, and the outcome may not reflect what you would have chosen.
If your nomination form is out of date
This is extremely common. Someone who set up a pension ten years ago and has since married, divorced, or had children may still have an ex-partner, a parent, or nobody named on the form. An out of date nomination can undo years of careful financial planning in a single oversight.
What to do
Log into every pension you hold and find the expression of wishes or beneficiary nomination section. For older or deferred pensions you may need to contact the provider directly.
Name your chosen beneficiaries and specify what percentage each receives. If you have multiple beneficiaries, make sure the percentages add up to 100%.
Review the form every few years and after any significant life change, including marriage, divorce, or the birth of children.
Keep a record of where your pensions are held and who the providers are. Your family will need this information and tracking down old workplace pensions after a death is a significant and unnecessary burden.
If you are consolidating pensions and transferring old workplace pots into a current scheme, check that your nomination carries over to the receiving scheme or fill in a new form. Do not assume it transfers automatically.
Defined benefit pensions
If you have a defined benefit (final salary) pension, the rules around death benefits are set by the scheme rules rather than your nomination alone. Typically the scheme will pay a spouse or civil partner pension and may pay a lump sum. Check your scheme documentation or contact the scheme administrator to understand exactly what is provided and who it goes to.
Death in service benefit
Many workplace pension schemes include a death in service benefit, a lump sum paid to your beneficiaries if you die while employed. This is typically two to four times your annual salary and is also nominated separately from your will via an expression of wishes form held by your employer or pension trustee.
Check whether your employer offers this benefit and whether you have a current nomination in place. If you have changed employers, death in service benefits from previous employers do not follow you. They are linked to each individual employer scheme.
Part 2: Life Insurance Beneficiaries
What happens to a life insurance payout
Life insurance pays a lump sum on your death. Whether it forms part of your estate depends on how the policy is set up, and this makes a significant difference to how quickly and efficiently your family can access the money.
Not written in trust
The payout forms part of your estate. It goes through probate, which takes time and in some cases months. It is available to creditors during that process and may be subject to inheritance tax if your estate is above the threshold.
Written in trust
The payout goes directly to your named beneficiaries outside your estate. It bypasses probate entirely, meaning your family can access the money within weeks rather than months. It also sits outside the reach of creditors and outside your estate for inheritance tax purposes.
Writing a life insurance policy in trust costs nothing. Your insurer will have a trust deed form. It takes around twenty minutes to complete. If you have a life insurance policy that is not written in trust, contact your insurer and ask for the form.
Once a policy is written in trust you generally cannot change the trust type, though you can usually update your named beneficiaries. Make sure you name the right people before you sign the trust deed.
Joint life policies
If you have a joint life insurance policy with a partner, the payout typically goes to the surviving partner automatically on the first death. The same trust principles apply on the second death if the policy includes a second life element.
Keeping nominations up to date
The same principle that applies to pension nominations applies to life insurance trust beneficiaries. Review them after any significant life change. An ex-partner named on a trust deed does not lose their entitlement simply because the relationship ended.
A practical checklist
Work through this list and tick off each item:
- Log into every pension and check your expression of wishes is current and names the right people
- Fill in a new nomination form for any pension where one is missing or out of date
- Check whether your employer offers a death in service benefit and confirm your nomination is current
- If you have life insurance, check whether it is written in trust. If not, contact your insurer and request the trust deed form
- Store the details of all pensions and policies somewhere your family can find them, along with provider contact details and policy numbers
What’s Next
With your pension nominations and life insurance in order, the next question is whether you have the right protection in place if you cannot work rather than if you die.
Life insurance, critical illness cover, and income protection serve different purposes and most people are unclear on where one ends and the other begins. The life insurance and income protection guide explains how each type works and how to think about whether you need them.
This is general information, not financial advice. Pension rules and tax legislation change. The proposed changes to pension inheritance tax treatment from April 2027 are not yet finalised. Consult a qualified independent financial adviser for guidance specific to your situation.