Who can I leave my pension to?

I was speaking at a webinar recently on the topic of financial independence. We wrapped it up with a Q&A, where one customer asked, ‘Do I have to leave my pension to my partner, or can I leave it to anyone?’

As someone who writes about personal finance day in, day out, it struck me how much of my knowledge I take for granted. Why on earth should this person know the answer to this question? It’s not their day job. And I’m sure they’re not alone, so I thought I’d write about it.

Pre-2015 and the introduction of pension freedoms, the rules around who you could leave your pension to were more restrictive. Since then, defined contribution pensions (like most personal and workplace pensions are nowadays) have become far more flexible.

You can usually nominate almost anyone to receive your pension when you die - whether that’s to your children, grandchildren, an unmarried partner, friends, or even a charity.

Who you leave your pension to is deeply personal - and important.

For some, it will absolutely make sense for everything to go to a partner. For others, it might not be so clear cut. They might be single, widowed, have no children or have been married multiple times. For me, this isn’t just about rules or tax treatment - it’s about intention. Right now, I’m currently choosing to leave most of mine to my children.

That might sound like an unusual decision at first, so let me explain my thinking.

If I were to die tomorrow, my husband would be financially supported. We’ve made sure of that through life insurance, which would provide a healthy payout. But life doesn’t stand still. If, in a few years’ time, he was to meet someone new, remarry, and build a life that includes other children, things could naturally shift. He might quite reasonably want to support that wider family.

And while that would be entirely understandable, it also means the money I’d originally intended for our children might not reach them in the same way.

By nominating my children directly for my pension, I’m making sure that at least some of what I’ve built up goes straight to them. It gives me peace of mind knowing that, should something happen to me, they’ll receive something from me regardless of how life unfolds afterwards.

Make your wishes known and keep them up to date

You’ll often hear this referred to as an ‘expression of wish’, although some providers call it a nomination. In essence, it’s a way of telling your pension provider who you’d like to receive your pension savings.

While it isn’t always legally binding - providers or trustees often retain the final say - it’s still a really important step. In most cases, they will follow what you’ve set out, especially if it’s clear and up to date.

And that last point matters more than people think. Life changes, sometimes in ways we don’t expect. Relationships evolve, families grow, circumstances shift. If your expression of wish hasn’t been updated in years, it may no longer reflect what you’d actually want today.

Taking a few minutes to review it after major life events can make a real difference.

How pensions are treated for tax

There’s also a tax angle, which is part of why pensions are often considered carefully as part of wider financial planning.

Under current UK rules, if you die before age 75, defined contribution pension savings can usually be passed on income tax-free to your chosen beneficiaries, provided the benefits are paid within the relevant timeframe and subject to available allowances. If you die at 75 or older, your beneficiaries can still inherit the pension, but withdrawals are typically taxed at prevailing income tax rates.

Pensions are also generally kept outside your estate for inheritance tax purposes under current rules. However, this is due to change. From 6 April 2027, most unused pension funds and death benefits will be included within the value of a person’s estate for inheritance tax purposes.

The spousal / civil partner exemption will still apply, meaning if you nominate your spouse / civil partner to receive your pension, it will be exempt from inheritance tax - regardless of its value. If you nominate your children as beneficiaries, most pensions will fall into the estate calculations and could be subject to a deduction to pay any inheritance tax due.

That means it’s worth reviewing your pension nominations as part of your wider estate planning - especially if your circumstances, family set-up or intentions have changed.

A quick note on different types of pensions

Of course, not all pensions work in exactly the same way.

Defined contribution pensions (like most personal and workplace schemes today) tend to offer the most flexibility when it comes to who can inherit. As we’ve explored, you can usually nominate a wide range of beneficiaries, and the provider will take your wishes into account.

Defined benefit pensions - sometimes called final salary or career average schemes - are often more restrictive. These schemes are typically designed to provide an income for a spouse, civil partner, or other financial dependants after you die, rather than a pot of money that can be passed on more freely.

In many cases, if there’s no eligible dependant, the benefits may be limited - sometimes just a lump sum or payments for a fixed period, depending on the scheme’s rules. You won’t usually have the same level of freedom to nominate anyone you choose.

That’s why it’s important to understand the type of pension you have, as the options available can be quite different.

• Read: 9 ways to protect your pension from IHT changes
• Read: What is inheritance tax? The basics
• Read: How to talk to your children about their inheritance

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances, and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.