Do I need to mention my pension in my Will?
Your Pension, your Will and Estate management – how do they work together for your beneficiaries?
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Do I need to mention my pension in my Will? (Part 1)
Ian Winterbotham explains how pensions and Wills work. Episode one of two, recorded in December 2025.
What happens to my pension when I die? How do pensions and Wills work together?
If you have a state pension, that normally stops when you die. Defined benefit schemes, like many government schemes or older company schemes, usually pay a guaranteed income to a spouse or a civil partner.
Some schemes also offer children’s pensions, and lump sum death benefits may be payable if you die before retirement.
Defined contribution pensions are pots you save an amount of money into each month, or each year, or by adding lump sums. Whatever’s left in your pension pot can usually be paid to your beneficiaries. The scheme Trustees have discretion over who receives this money.
Most private pensions known as SIPPs are also discretionary Trusts, which also means that the Trustees decide who receives the benefits. Your Will is not binding on those decisions.
Can I leave my pension to someone in my Will?
In the vast majority of cases, no, except for very old schemes which were not governed by pension Trustees. It’s the pension Trustees who distribute your pension funds.
Who inherits my pension if I don’t include it in my Will?
This is something a lot of people should ask themselves – and check they’ve completed an ‘expression of wish’, sometimes also called a nomination form.
When you set up a pension, or after it’s started, you can say who you want your pension benefits to go to. If you’ve only got a spouse or you’ve only got children, it’ll be fairly easy for the pension Trustees to know who to pay the benefits to.
But if you’re from a blended family, or you’ve been divorced, or you have a spouse and children, it’s quite important to check you’ve completed this document.
Is my pension part of my estate?
It’s not part of your estate, because it’s the pension Trustees who make the decisions. Your pension funds are in a Trust for which they are Trustees.
To confuse matters, the value of your pension funds are going to be brought into the scope of inheritance tax from April 2027, and included in the estate value. This is a big change and so you will need to consider it as part of your estate when thinking about how much inheritance tax is due [information correct at the time of recording in December 2025].
Do I need to tell my pension provider who my beneficiaries are?
Yes. Your expression of wish, or nomination form as they call it sometimes, is the key document.
Should I review my pension nominations when updating my Will?
Yes, that’s a really important thing to do – and a really good time to do it. We’ll talk a bit more about that later on in the podcast.
Will my pension nomination override my Will?
Your pension nomination will deal with your pension assets, not with the rest of your estate. Your Will deals with any property you have, any stocks and shares, bank accounts, financial assets and the rest of your estate.
A pension nomination will not override your Will and it won’t affect any of the assets your Will deals with. It only deals with the assets in your pension.
What’s the difference between a pension beneficiary nomination and a Will beneficiary?
The pension beneficiary nomination relates to the money that’s in your pension. A Will beneficiary will benefit from the rest of your estate.
Does this apply to both private and workplace pensions?
Yes, everything we’ve said so far does apply to both.
What happens with my state pension? Is that included in my Will?
No, and your state pension normally stops when you die. In limited cases, a spouse or civil partner may inherit a portion of it. That will depend on how old they are and your National Insurance record.
How do pensions and Wills work together?
You may wish to leave pension assets to certain beneficiaries as detailed in your expression of wish. You could then use your Will to leave assets from your property, bank accounts or stocks and shares to other people. You can also deal with things like your car and other items called ‘chattels.’
It’s up to you who should be the beneficiaries of all of those things, and you state your wishes in your Will. This is totally separate from nominating the beneficiaries of your pension assets.
You then need to consider how any inheritance tax should be paid. Perhaps some inheritance tax can be paid out of the pension pot – if not, it all has to come from the assets left to your beneficiaries via your Will.
There’s the potential for conflict there if you have different beneficiaries for your pension from those of your Will. This issue does complicate matters and will require further consideration.
We will be back with Part Two; any final thoughts before that?
I think any questions in the listener’s mind at the moment may well be answered in Part Two.
Key Takeaways:
- In the vast majority of cases, you cannot leave your pension to someone in your Will. The pension Trustees, who manage the funds as a discretionary Trust, are the ones who distribute the benefits, and your Will is not binding on their decision.
- You must complete an ‘expression of wish’ or nomination form (sometimes called a beneficiary nomination) with your pension provider to indicate who you wish to receive the funds upon your death.
- It is good practice to review and update your pension beneficiary nominations whenever you update your Will.
- Your pension nomination deals only with your pension assets and will not override or affect the assets that are managed by your Will (such as property, bank accounts, or shares).
- Although a pension is generally not part of your estate, the value of your pension funds is set to be included in the scope of inheritance tax from April 2027, which requires consideration as part of your overall estate planning.
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Do I need to mention my pension in my Will? (Part 2)
Ian Winterbotham continues the conversation on how pensions and Wills work. Episode two of two, recorded in December 2025.
What happens to a defined contribution pension after death?
Defined contribution pensions are where you put money in each month or year or on other occasions. It has an overall value.
Whatever is left in your pension pot can usually be paid to your pension beneficiaries. As we mentioned before, you choose who gets that by completing an expression of wish, also known as a nomination form.
The beneficiaries can usually take a lump sum or an annuity (which is an annual payment), or draw down amounts as and when they need them.
It’s important to note that the pension Trustees have discretion over who receives the money. This discretionary structure is why defined contribution pensions have historically sat outside of the estate for inheritance tax purposes. But that’s all going to change in 2027.
How are defined benefit pensions treated when someone dies?
Defined benefit schemes, like many government schemes or older company schemes, usually pay a guaranteed income to a spouse or civil partner.
If you die before retirement, they often have arrangements whereby your children can receive a pension and lump sum death benefits. Other than that, pensions will cease when someone dies.
Do I need legal advice to make sure my pension wishes are clear?
It’s important that your expression of wish is clear and simple. Legal advice is often given around expression of wishes when people are going through a divorce. Otherwise, try and keep them as clear and simple as you can, without conditions.
Can I name my executor to handle pension matters?
No, it’s the pension Trustees who decide where the money goes. Having said that, when it comes to calculating inheritance tax, your executors will need to communicate with pension Trustees to calculate what tax needs to be paid.
I hope that’s not confusing – yes, you will be in communication, but you won’t be influencing the pension Trustees’ discretion. Pension Trustees may however ask for a copy of the Will to find out what the person’s intentions were.
Should I mention my pension details in a letter of wishes instead of my Will?
Yes, you could do this. I had a recent conversation with a client who wanted to make sure their children thought they were being treated equally. A lot of people are very keen to do that. They don’t want their children to fall out, or for there to be any bad feeling.
It might help to make it clear that you want all your children to be treated equally when combining the benefits from the pension assets and other estate assets. That’s especially the case if you don’t know how much inheritance tax is going to be paid, and where it’s going to be paid from.
Can my Will be used as evidence of my pension wishes if I didn’t complete a nomination form?
Yes, the Will would normally be considered by the pension Trustees, but they will use their discretion with regards to the pension assets. Trustees will normally consider the expression of wish, the beneficiary’s family circumstances and the pension holder’s family circumstances.
They will consider the testator’s Will as evidence of intentions, but that Will does not override the pension rules.
Is my pension subject to inheritance tax?
It could be. From April 2027, pension assets will be included in the calculations.
Can leaving my pension outside my estate help with inheritance tax planning?
In the past, some people have left their pension benefits to a discretionary Trust, so that it doesn’t end up in the spouse’s estate or even the children’s estate.
That would have avoided the risk of paying inheritance tax on the funds given as a lump sum to the spouse or the children. I don’t believe this would avoid any inheritance tax at all from April 2027 – but not having had experience of dealing with it yet, I can’t be 100% sure.
Is there any government guidance as to how inheritance tax can be paid and whether executors can ask the pension Trustees to pay the inheritance tax due?
This leads on from the previous question about whether you can avoid inheritance tax by leaving benefits into a discretionary Trust, and where inheritance tax can be paid from.
It seems that there will be options. Some inheritance can be paid out of pension pots and some would be paid out of the estate as normal.
HMRC states explicitly that personal representatives – the executors or the administrators of the estate – will be responsible for reporting the pension value, calculating the inheritance tax and paying any tax that is due.
You can have a look at the details on the government website, but this will only apply once the rules come into force from 6 April 2027. At this point I can’t speak from experience around how it’s going to operate.
What else do we need to know about pensions and Wills?
I’ve got a thought that could be worth many tens of thousands of pounds to some people.
It’s been consistent in my thinking while dealing with pension administration issues for the last five years.
The idea is to add a nil rate band discretionary Trust to your Wills if you are a married couple, or in a civil partnership and think that your combined estates might be worth between £2 million and £3 million on second death. This could save up to £65,000 in inheritance tax under current rules.
It’s because of the taper within the residence nil rate band, RNRB, after combined estates reach a value of £2 million. The RNRB allowance that can be applied is reduced by £1 for every £2 by which the combined estate exceeds the taper threshold of £2 million.
Creating a nil rate band discretionary Trust in your Will on first death should allow your children to receive the full allowances without any taper on the estates, if your estate is valued at £2 million.
With the combined estate on second death, the same saving applies. A nil rate band discretionary Trust would just hold the amount of the nil rate band, which is £325,000. It would provide power for the Trustees to lend money to the beneficiaries, and you can keep this Trust going for 125 years without the need for accounts or 10 year anniversary charges.
As long as it’s administered properly, when the first person dies and then on second death, it potentially could save 40% tax in every generation – in addition to the £65,000 – if your estate’s worth between £2 million and £3 million.
Of course, we now need to consider pension assets as well as property, stocks and shares, bank accounts, cars etc. It may only be for a small proportion of the population, but a lot of people in the M25 area will be caught in this potential trap. This can put their minds at rest – they would be making a significant effort to save tens of thousands of pounds for their bloodline, with a relatively simple instruction to create a nil rate band discretionary Trust in their Will.
For more on this, look at our other podcasts and website articles to understand how it all works together. Or, you can make an appointment – just give Will Power a call or book via our Contact Us page.
Key Takeaways:
- The beneficiaries of Defined Contribution Pensions are typically chosen via an ‘expression of wish’ or nomination form. The pension Trustees have discretion over who receives the money, which is why they have historically sat outside the estate for Inheritance Tax (IHT) purposes.
- Defined contribution pension assets will be included in IHT calculations starting from April 2027, changing their historical treatment outside of the estate.
- Defined Benefit Pension schemes usually pay a guaranteed income to a spouse or civil partner. If the person dies before retirement, arrangements often exist for children to receive a pension and lump sum death benefits.
- While pension Trustees will consider a person’s Will or Letter of Wishes as evidence of their intentions regarding beneficiaries, the Will does not override the pension scheme’s rules, and the Trustees ultimately retain discretion.
- Married couples or those in a civil partnership with combined estates valued between £2 million and £3 million could potentially save up to £65,000 in IHT by including a nil rate band discretionary Trust in their Will on first death. This can help avoid the taper applied to the Residence Nil Rate Band (RNRB).