Understanding Pension Beneficiary Categories
When you die, the people who can receive your pension death benefits fall into distinct categories under UK pension law. The two most important are dependants and nominees. A third category — successors — applies when a beneficiary who inherited a pension themselves then dies.
The category matters because it determines who qualifies to receive benefits, what form those benefits can take, and how they are taxed. The 2015 pension freedoms significantly expanded flexibility by introducing the nominee and successor categories for defined contribution pensions.
Who Is a Dependant?
A dependant is someone who was in a qualifying relationship with, or financially dependent on, the pension holder at the time of their death. The definition is set out in pension legislation and includes:
- Spouse or civil partner — the pension holder's husband, wife, or civil partner at the date of death
- Children under 23 — the pension holder's child (including adopted and stepchildren) who has not yet reached age 23
- Financially dependent individuals — anyone who was financially dependent on the pension holder at the date of death (this could include an unmarried partner)
- Mutually dependent individuals — someone in an interdependent relationship with the pension holder (financial dependence in both directions)
Proving Financial Dependence
For individuals who are not a spouse, civil partner, or qualifying child, financial dependence must be demonstrated. This typically means showing that the person relied on the pension holder for a significant portion of their living costs. Each pension scheme may have its own process for assessing claims of dependence.
Who Is a Nominee?
A nominee is anyone the pension holder has specifically named on their nomination (expression of wish) form to receive death benefits. Unlike dependants, nominees do not need to have had any financial relationship with the pension holder.
Nominees can include:
- Adult children who are financially independent
- Grandchildren of any age
- Friends or other individuals
- Charities or other organisations
- Trusts
The nominee category only exists for defined contribution pensions. Defined benefit schemes generally restrict death benefits to dependants only.
Key Differences at a Glance
| Feature | Dependant | Nominee |
|---|---|---|
| Qualification | Automatic if spouse/civil partner/child under 23, or proven financial dependence | Must be named on nomination form |
| Nomination form needed? | No (automatic entitlement), but recommended | Yes (essential) |
| Available for DB pensions? | Yes | Generally no |
| Available for DC pensions? | Yes | Yes |
| Can receive drawdown income? | Yes (DC pensions) | Yes (DC pensions) |
| Can receive a lump sum? | Yes | Yes (DC pensions) |
| Can pass on to successors? | Yes (dependant's drawdown can pass to successor on their death) | Yes (nominee's drawdown can pass to successor on their death) |
| Tax if death before 75 | Tax-free | Tax-free |
| Tax if death at 75+ | Marginal income tax rate | Marginal income tax rate |
What Is a Successor?
A successor is someone who inherits a pension after a dependant or nominee who was receiving drawdown income themselves dies. This creates a chain of inheritance:
- Original pension holder dies → benefits pass to dependant or nominee
- Dependant or nominee dies → remaining funds pass to their nominated successor
Successors can be nominated by the dependant or nominee who inherited the pension. They enjoy similar drawdown and lump sum options. Tax treatment depends on the age of the original pension holder at their death, not the age of the dependant or nominee.
Tax Treatment in Detail
Both dependants and nominees benefit from the same tax rules based on the original pension holder's age at death:
Death Before Age 75
- Lump sum payments: tax-free (subject to the lump sum and death benefit allowance)
- Drawdown income: tax-free
- Annuity income: tax-free
Death at Age 75 or Over
- Lump sum payments: taxed at the recipient's marginal income tax rate
- Drawdown income: taxed at the recipient's marginal income tax rate
- Annuity income: taxed at the recipient's marginal income tax rate
For more on the allowances that apply, see our guide to the lump sum and death benefit allowance.
How Dependant's Pensions Work in DB Schemes
In a defined benefit (final salary or career average) pension scheme, a dependant's pension is typically an automatic entitlement built into the scheme rules. The most common provisions are:
- Spouse's pension — usually 50% of the member's pension, paid for the rest of the spouse's life. Some schemes pay two-thirds or even 100%.
- Children's pension — a smaller percentage, often split between dependent children, payable until age 18 or 23 if in full-time education.
- Lump sum death benefit — some schemes pay a lump sum (often 2–4x salary) if the member dies in service.
DB schemes generally do not pay benefits to nominees. If you are not married or in a civil partnership, your partner may not qualify unless the scheme specifically allows cohabiting partner benefits. Always check your scheme booklet or contact the scheme administrators.
How Nominee's Pensions Work in DC Schemes
With a defined contribution pension, you have full flexibility to nominate whoever you choose. On your death, nominees can:
- Take the entire remaining pot as a lump sum
- Move the funds into nominee's flexi-access drawdown and take income as needed
- Purchase an annuity with the inherited funds
- Leave the funds invested for future use
There is no time limit by which a nominee must draw down the funds. They can leave the money invested indefinitely, allowing it to grow within the pension wrapper.
Practical Steps to Protect Your Beneficiaries
- Complete nomination forms for every pension — even if your intended beneficiaries would qualify as dependants, a nomination form makes your wishes clear and speeds up the claims process
- Review nominations regularly — after marriage, divorce, births, deaths, or any change in family circumstances
- Check DB scheme rules — understand exactly who qualifies as a dependant under your scheme and what benefits they would receive
- Consider your overall estate plan — pensions, ISAs, property, and other assets should work together. A financial adviser can help coordinate your plans. Get matched with a pension adviser today.
- Inform your beneficiaries — make sure your intended recipients know about your pension arrangements and who your pension provider is
Next Steps
Review your nomination forms across all pensions. Check whether your intended beneficiaries qualify as dependants, or whether they need to be formally nominated. For defined benefit pensions, contact your scheme to confirm who would receive benefits on your death. If your family structure is complex or your pension pot is substantial, speak to a regulated financial adviser for personalised guidance.