My Dad Died. Nobody Told Me I Could Owe The Tax.

If your dad has died and he had a private or workplace pension, the money in it does not pass to you the way the rest of his estate does. It is not dealt with by his will, and it is not automatically yours because you are his child. In most cases the pension provider or the scheme trustees decide who receives it, guided by a nomination form he filled in — perhaps years ago, perhaps never.

That is the first thing almost nobody tells an adult child about what happens to his private pension. The second is newer and harder. From 6 April 2027 the people who inherit an unused pension can be drawn into paying the inheritance tax on it. So a pension you were not certain you would even receive can arrive with a tax liability attached.

This page sets out what happens to your father's private pension now, why you are treated as a "nominee" rather than a "dependant", how the money is taxed depending on his age when he died, and what the April 2027 change means for who actually settles the bill.

The short answer: the pension sits outside the will

Most private and workplace pensions are held under a trust, or under rules that work in a similar way. That single fact changes everything about how the money is passed on. Property that a person owns outright — the house, the bank accounts, the car — forms part of their estate and passes under their will, or under the intestacy rules if there is no will. A pension held under trust is not owned by the member in that way. It is paid out by the trustees or the provider under their own rules, and the will has no say over it.

This is why you can find yourself in the strange position of being the executor of your father's estate, dealing with his house and his accounts, and yet having no automatic right to his pension at all. The two things run on separate tracks. If he died without a will and you are sorting out the house, that is a wholly separate problem, and we have covered it in what happens when a parent dies without a will and the house is in his name. The pension is decided elsewhere.

What guides that decision is the nomination form — sometimes called an expression of wish or a nomination of beneficiaries. It is your father telling the trustees who he would like the money to go to. It is not binding on them, but in practice they follow it in the great majority of cases. If he never completed one, or completed it decades ago and never updated it, the trustees are left to decide with far less to go on.

Nominee or dependant — and why the difference matters

Pension law divides the people who might receive a death benefit into categories, and the category you fall into decides what you can be offered. The three that matter are dependants, nominees and successors.

A dependant is a narrow group: a spouse or civil partner, a child under 23, or someone who was financially dependent on the member, or dependent because of a physical or mental impairment. An adult child who is financially independent is not a dependant, however close the relationship was. That surprises people, because in ordinary language a grown-up son or daughter feels like the most obvious dependant of all. For pension purposes, they usually are not.

A nominee is anyone the member named on the form who is not a dependant. That is the box most adult children fall into. And here is the consequence that catches families out: a nominee can generally only be paid, and can only keep the money invested inside a pension, if the member actually nominated them. If your father named you, you have options. If he did not, the trustees can still decide to pay you — but whether you can hold the money as ongoing income rather than take it all at once may depend on whether a valid nomination existed. Whether that door is even open often comes down to a single line on the form, which we unpick in the beneficiary drawdown tick box and how it decides the way you are taxed.

What the trustees actually decide

Because the payment is discretionary, the trustees are not simply reading a name off a form and posting a cheque. They are making a decision, and they are entitled to look beyond the nomination if the member's circumstances changed. If your father remarried, separated, had more children, or fell out with someone named years earlier, the trustees can take that into account.

In practice they will ask for a copy of the death certificate, the will if there is one, and information about who depended on him and who survives him. They may write to the family asking questions. This takes time, and it is one reason the money does not appear quickly. It is also why a blended family can produce a genuinely difficult decision, with a second spouse and children from a first marriage all potentially in the frame — a situation we look at in splitting a pension between a second spouse and children of a first marriage, where the tax treatment of each share is not the same.

One further thing to check is whether there is more than one pot. It is common for someone to have a main pension plus an additional voluntary contribution arrangement sitting alongside it, and that second pot can carry its own separate nomination form that the member never saw. If your father had a final salary scheme, look specifically for whether there was an AVC with its own nomination form before you assume the main scheme paperwork covers everything.

How the pension is taxed: the age-75 line

For a defined contribution pension — a pot of money, as opposed to a promised income — the income tax treatment of a death benefit turns almost entirely on one thing: how old your father was when he died.

If he died before the age of 75, benefits that are paid out or designated to a beneficiary within two years are normally free of income tax. The two-year window matters. Miss it, and benefits that would have been tax-free can become taxable, so this is not a decision to leave sitting in a drawer for eighteen months.

If he died at 75 or over, there is no tax-free treatment. You pay income tax at your own marginal rate on whatever you draw. That has a practical sting for an adult child who is working: taking the whole pot as a single lump sum can pile the entire amount onto your income in one tax year and push you into a higher band, when spreading it over several years as income might have been taxed far more gently. Whether you can spread it that way depends on the nominee rules above — which is exactly why the form your father signed, or did not sign, matters so much.

What changes on 6 April 2027

Until now, one of the quiet advantages of a pension has been that most unused funds sat outside the estate for inheritance tax. That is changing. The government has confirmed that from 6 April 2027 most unused pension funds and death benefits will be brought into the value of a person's estate for inheritance tax purposes.

Source: HM Treasury and HMRC impact note, Inheritance Tax on unused pension funds and death benefits (2027–28), published under the Open Government Licence.

Inheritance tax is charged at 40% on the part of an estate above the available nil-rate band, which has stood at £325,000 for a single person. Transfers to a spouse or civil partner remain exempt, and that exemption is being preserved for pensions too — so a pot passing to a surviving husband or wife is not caught, while the same pot passing to an adult child can be.

Source: GOV.UK, How Inheritance Tax works: thresholds, rules and allowances.

That is the heart of why this change lands hardest on adult children. The people most likely to be exempt — spouses and civil partners — are the people you, as a son or daughter, are not. The people most exposed to the new charge are exactly the nominees this page is written for.

Who actually pays the inheritance tax

This is the part that catches adult children out, and it is worth reading slowly. Under the rules taking effect on 6 April 2027, the responsibility for reporting and paying the inheritance tax on unused pensions is shared. The personal representatives of the estate — the executors, or the administrators if there is no will — carry the reporting duty. The scheme administrators can pay the tax attributable to the pension directly from the pension funds. And beneficiaries who receive pension death benefits can be jointly and severally liable for the tax on the share they take.

"Jointly and severally liable" is the same phrase that governs a joint mortgage, and it means the same uncomfortable thing here: HMRC does not have to collect an even slice from each person, and it does not have to exhaust one route before turning to another. If the tax on your share is not settled by another route, you can be pursued for it. Taking the money without first establishing how the tax will be paid can therefore leave you holding a bill for a liability you did not know you had accepted.

The practical protection is simple and specific: before you take anything, ask the provider in writing what they intend to pay HMRC, and whether they will settle the inheritance tax on the pension from the fund before releasing your share. Do not assume it has been dealt with elsewhere. Separately, if HMRC contacts the estate about tax your father owed for the year he died, that is a different debt again, and we explain it in what to do when HMRC says a person owed tax for the year they died.

What to do before you take anything

The order of operations matters more than most people realise. A rushed lump sum withdrawal can cost far more in income tax than it needed to, and can leave the inheritance tax question unresolved.

• Find every pension. Look for statements, and if you cannot piece it together, the government's Pension Tracing Service can help you locate providers from an employer's name.
• Ask the provider three questions. What nomination do they hold; how old was he when he died, so you know the income tax position; and what do they intend to pay HMRC for inheritance tax before releasing your share.
• Watch the two-year window if he died before 75, because letting it lapse can turn a tax-free benefit into a taxable one.
• Think before you take it all at once. If he was 75 or over, a single lump sum can be taxed as your income in one year. Ask whether it can be taken as income instead.
• Get advice on anything large or complicated, particularly where an inheritance tax charge and an illiquid asset overlap. An FCA-authorised broker or a regulated adviser can price the trade-offs against your actual position.

Watching this happen to a parent is also the moment many people look hard at their own arrangements — a spouse, young children, a mortgage that would not clear itself. If that is you, and you want to understand what cover on your own life would look like against the estate you would leave, you can get life insurance quotes and have a broker set it against your circumstances. You will find the rest of this territory mapped out in our guide to pensions, nominations and death benefits.

Scotland and Northern Ireland

Inheritance tax is a UK-wide tax collected by HMRC, so the April 2027 change and the 40% rate apply the same way wherever in the United Kingdom your father lived. The discretionary trust treatment of most pensions is also a feature of pension law that runs across the UK, so the "nominee not dependant" point holds throughout.

What differs is the machinery for administering the estate around the pension. In Scotland the process is confirmation rather than probate, the people who deal with the estate are executors, and the fixed rights a surviving spouse and children have in an estate work differently from the law in England and Wales. In Northern Ireland the succession rules and the grant process differ again and are handled through its own probate office. None of that changes the tax on the pension, but it changes who is administering the estate that now has to account for it — so make sure you are following the right jurisdiction's rules for the estate itself.

Frequently asked questions

Do I automatically inherit my father's pension?

No. Defined contribution pots are normally paid at the trustees' or provider's discretion, guided by his nomination form. As an adult child you are a nominee rather than a dependant, so you can only be paid if he named you, or if the trustees decide to include you after reviewing his circumstances. His will does not control where the pension goes.

Will I pay tax on my father's pension?

If he died before 75, benefits paid or designated within two years are normally free of income tax. If he was 75 or over, you pay income tax at your own marginal rate on withdrawals, so taking it all in one year can push you into a higher band. From 6 April 2027 unused funds also count in his estate for inheritance tax, which is a separate charge again.

Who actually pays the inheritance tax on an inherited pension?

Under the rules taking effect on 6 April 2027, liability is shared between the personal representatives, the scheme administrators and the beneficiaries, who can be jointly and severally liable for the tax on the share they receive. Ask the provider what they intend to pay HMRC, and whether they will settle it from the fund, before you take anything.