Second Wife, First Marriage's Children, One Pension Pot

Yes, you can split your pension between your wife and your children. On almost every defined contribution pension — a personal pension, a SIPP, a workplace pot — the nomination form lets you name several people and put a percentage against each, and you can rewrite that split whenever you like. So the mechanics of dividing a pot between a second spouse and the children of a first marriage are straightforward.

The part that is not straightforward, and that catches blended families out, is the tax. From 6 April 2027 the two halves of that split are treated completely differently. The share you leave to your wife is exempt from inheritance tax under the spouse exemption. The share you leave to your children is not: it is added to the value of your estate and, once your available nil-rate band is used up, taxed at 40%. One instruction, one form, two entirely different tax outcomes for the people you love.

This page walks through why that happens, does the arithmetic on a divided pot, and sets out what is worth weighing before the change takes effect.

How the split works on the form

Start with the good news, because it is genuinely simple. A defined contribution nomination form — sometimes called an expression of wish — is designed to be divided. You list the people you want to benefit, you assign each a share, and the shares add up to the whole. You can name your wife for one portion and each child for another, in whatever proportions you choose, and you can change it after a birthday, a house move, a fallout or a reconciliation.

Two details are worth getting right while you are there. First, say what should happen if one of the named people dies before you do, so a share does not fall into limbo. Second, if any of your beneficiaries is not a dependant — an adult child, typically — check whether they are nominated for beneficiary drawdown, because that decides whether they can take an income or only a lump sum. That single question is covered in full in our piece on the difference between a dependant under 23 and a nominee over it, and it interacts with everything below.

Why your wife's share is exempt and the children's is not

The reason the two halves diverge is one of the oldest rules in inheritance tax: the spouse and civil partner exemption. Anything you leave to a husband, wife or civil partner passes free of inheritance tax, with no upper limit. Anything you leave to anyone else — children included — does not get that exemption and is potentially chargeable.

Above the nil-rate band, inheritance tax is charged at 40%. The nil-rate band is the slice of an estate that is taxed at nothing, and the standard band is £325,000, a figure that has been frozen for many years. There is also a separate residence nil-rate band, worth up to £175,000, where a home passes to direct descendants — but it applies to the home rather than to a pension pot, and it tapers away for larger estates.

Source: HM Revenue & Customs, How Inheritance Tax works: thresholds, rules and allowances, gov.uk, published under the Open Government Licence v3.0.

So the split does two different jobs at once. The share to your wife slides out under the spouse exemption and is not taxed. The share to your children lands on top of the rest of your estate, eats into whatever nil-rate band is left after your house and savings, and is taxed at 40% on anything above it. The nil-rate band is not doubled up for the children — it is one band spread across the whole estate, so if the house has already used it, the children's pension share can be fully exposed.

What changes on 6 April 2027

Until now, this arithmetic barely applied to pensions, because most unused pension funds sat outside the estate for inheritance tax altogether. That is what is changing. From 6 April 2027, unused pension funds and certain lump sum death benefits are brought into the value of a person's estate for inheritance tax purposes. The spouse and civil partner exemption is being preserved, which is exactly why the wife's share stays exempt while the children's share is drawn in.

Source: HM Treasury and HM Revenue & Customs, Inheritance Tax on unused pension funds and death benefits (2027-28), policy paper and impact note, gov.uk.

Not everything a pension can pay is caught. Death in service benefits from a registered scheme and survivors' pensions from defined benefit schemes sit outside the change, which surprises people who assume the whole of a pension is now exposed. If part of your family's protection runs through your employer, it is worth reading exactly why death in service is excluded from the 2027 change before you assume the worst about all of it.

There is a second sting for the children's share that has nothing to do with inheritance tax. If you die at 75 or over, whatever your children eventually draw from the inherited pot is also taxable as their income. So from 2027 a child's share can meet inheritance tax as it enters your estate and then income tax as they withdraw it. A spouse's share, being exempt from the first charge, does not carry that same double weight.

The arithmetic on a divided pot

Picture the pot divided down the middle: half to your wife, half between your two children. Set aside the exact size for a moment and follow what happens to each half.

Your wife's half is exempt. It passes to her without inheritance tax, and — a quieter benefit — leaving it to her also preserves your nil-rate band, which can transfer to be used when she later dies. Nothing is lost on that side.

Your children's half is different. It is added to the estate. If your home and other assets have already absorbed the £325,000 nil-rate band, there is nothing left to shelter the children's share, and the whole of it is exposed to inheritance tax at 40% before they see it. If you die at 75 or over, income tax then applies to what they draw. The practical result is that two beneficiaries named on the same line of the same form, for the same money, keep very different amounts of it.

This is the mathematics behind so many second-marriage disputes about a single asset that cannot be divided cleanly — the same tension runs through one house shared between two families and through the way intestacy splits an estate in a second marriage when there is no valid nomination or will at all. A pension divided by percentages avoids the worst of that, but only if the percentages are set with the tax in mind.

Your will does not decide this — the nomination does

The most dangerous assumption in a blended family is that a carefully drafted will settles the pension. It usually does not. A pension held under trust is paid under the scheme rules and the trustees' discretion, guided by your nomination form — not under your will. Your will can leave everything neatly divided and your pension form can say something completely different, and the pension form wins for the pension.

That gap matters most after a remarriage. People update the will, or think they have, and never touch the pension nomination, which may still name a first spouse or fail to mention the second one at all. The two documents need to be read together, as a pair, particularly after a divorce or a new marriage, because a stale form can hand a share to exactly the person you meant to remove. How a home is left to a new spouse while protecting children from a first marriage is a related tangle, set out in our guide to a second marriage, one house and children from the first.

What to weigh before April 2027

None of this is a reason to panic, and none of it is advice about your particular circumstances. But there are a few things a blended family can sensibly check while there is time.

Confirm what type each of your pensions actually is, because a defined benefit survivor pension and a pot of money are treated differently under the change. Get every nomination form up to date and consistent with your will. Work out, roughly, whether your nil-rate band is already spoken for by the house, because that determines how exposed the children's share really is. And think about whether the pension is the right vehicle for the children at all, or whether it is better used to look after the surviving spouse — with the children provided for another way.

It is also worth asking each scheme, in writing, how it would deal with a split nomination on your death, and keeping that answer with your other papers so whoever administers your estate is not guessing. The precise mechanics of how the new pension charge is reported and collected are still bedding in, and the surrounding thresholds can move at any Budget, so treat the position as something to review rather than set once and forget. A blended family is exactly the situation where a short conversation with a solicitor or a qualified adviser earns its keep, because the interaction between a will, a pension nomination and two sets of children rarely reduces to a single tidy rule. Revisit all of it after any birth, marriage, divorce or house move, since each of those can quietly change who your named shares should go to and how heavily each one is taxed.

That last point is where life cover often does the quiet work. A level term policy written in trust for the children can deliver a fixed, tax-free lump sum straight to them, sitting outside your estate and outside the pension change, while the pension itself passes to your spouse under the exemption. It is a clean way to give each side of a blended family what you intend without one share being taxed twice. If you want that priced against your own situation, you can compare life insurance quotes through an FCA-authorised broker, and read the wider picture in our guide to pensions, nominations and death benefits.

Scotland and Northern Ireland

Inheritance tax is a UK-wide tax, so the spouse exemption, the 40% rate and the 2027 pension change apply the same way in England, Scotland, Wales and Northern Ireland. What differs across the nations is the succession law that decides what happens when there is no valid nomination or will to fall back on. In Scotland a surviving spouse and children have prior rights and legal rights that bite on part of an estate regardless of what any document says, and the intestacy shares differ from those in England and Wales. Those rules do not change the pension tax, but they change what a blended family ends up with if the paperwork is left undone — which is the strongest argument for not leaving it undone.

Frequently asked questions

Can I split my pension between my wife and my children?

Yes. Most defined contribution nomination forms let you name several people with a percentage each, and you can change the split whenever you like. The percentages must add up to the whole, and it is worth saying what should happen if one of the named people dies before you do. The split itself is easy; the tax on each share is where blended families need to look carefully.

Why is one share taxed and the other not?

Because the spouse exemption applies only to the share passing to your wife or civil partner. From 6 April 2027 unused pension funds count towards your estate, so the children's share is chargeable to inheritance tax at 40% above the available nil-rate band, while hers is exempt. If you die at 75 or over, the children's share can also face income tax as they draw it.

Does my will deal with the pension split?

Not usually. A pension held under trust is paid under the scheme rules and the trustees' discretion, not under your will, so your will can say one thing and your nomination form another. The two documents need to be reviewed together, particularly after a remarriage or a separation, because a stale nomination can override the intentions set out in an up-to-date will.