Can I Leave My Pension To My Grandchildren?

Yes, your grandchildren can inherit your pension — but only if you do one specific thing, and the tax they pay turns almost entirely on your age when you die. On most modern defined contribution pensions you can name whoever you like, grandchildren included, on a nomination or expression of wish form. What you cannot do is assume they will be looked after without it. A grandchild who is not financially dependent on you is a nominee, not a dependant, and a nominee can generally be paid only if you actually named them.

That single distinction is why naming grandchildren as pension beneficiaries is worth getting right rather than leaving to chance. Miss the form and the money can end up going to your dependants or your estate instead, with your grandchildren receiving nothing directly from the pot. Complete it well, and a grandchild can keep the money inside a pension and draw it over years at their own tax rate — one of the more efficient things a pension can still do.

This page explains the nominee-or-dependant question for a grandchild, how a pension left to a grandchild is taxed against your age at death, and why the inheritance tax change arriving in April 2027 changes the sums for them in particular.

Nominee or dependant: why a grandchild is different

Pension schemes divide the people who can receive death benefits into categories, and the category decides the options. A dependant is, broadly, a spouse or civil partner, a child under 23, or someone financially dependent on you — and a dependant can be offered the full range of choices, including keeping the money in a pension and drawing an income. A nominee is anyone else you have specifically named. A grandchild who lives their own life and does not rely on you for money falls into the second group.

The reason this matters is that trustees have limited freedom with someone who is neither a dependant nor a named nominee. Where there are surviving dependants, the scheme generally cannot simply hand a non-dependant grandchild an income from the pot. And even the flexible drawdown option that makes a pension so useful to inherit is normally only available to a nominee if you nominated them. In short, the form is not a formality for grandchildren — it is the thing that lets them be paid at all, and lets them be paid in the better way.

This is the same nomination discipline that decides so much across workplace pensions. If you have several old pots from different jobs, each has its own form, and it is easy to have named nobody on any of them, a trap we cover in the guide to five jobs, five pension pots and not one nomination form.

How to actually name them, and keep it working

Naming grandchildren is usually a matter of listing them on the provider's expression of wish form with a percentage each. A few points make the difference between a form that works and one that causes an argument.

• The percentages should add up to 100%. Leaving a gap forces the trustees to guess what you meant for the remainder.
• Say what should happen if a named grandchild dies before you do, so their share has somewhere to go rather than falling back into a dispute.
• Review it after every family change — a birth, a death, a marriage, a divorce. An out-of-date form is worse than none, because it points confidently in the wrong direction.
• Remember the form is guidance to the trustees, not a binding instruction. Keeping it clear and current is what makes the trustees comfortable following it.

If you are weighing up whether to leave the pension at all or draw it down yourself, particularly after a health scare, that is a genuinely different decision, and we work through it in draw it or leave it: your pension after a diagnosis. The wider set of nomination questions sits in our guide to pensions, nominations and death benefits.

How a pension left to a grandchild is taxed

The income tax treatment of an inherited pension has, for years, turned on one thing: how old you were when you died.

If you die before age 75, and the benefit is paid or designated to the grandchild within two years, it is normally free of income tax, whether they take it as a lump sum or keep it in a pension and draw an income. If you die at 75 or over, your grandchild pays income tax at their own marginal rate on whatever they withdraw. That is where keeping the money inside a pension earns its place: instead of taking one taxable lump sum in a single year, the grandchild can draw smaller amounts over many years and stay in lower tax bands.

There is a quiet advantage for younger grandchildren here. Money drawn from an inherited pension is taxed at the grandchild's own rate and against their own personal allowance, and the usual rule that taxes a parent's gifts to a minor child as the parent's income does not apply to a pension death benefit from a grandparent. A grandchild with little other income can therefore draw a modest amount each year and pay very little tax on it — an option a single lump sum throws away. This is the mechanism sometimes described as beneficiary, or nominee's, flexi-access drawdown, and it is only open to a grandchild you nominated.

What April 2027 changes for grandchildren

Until now, one of the reasons a pension has been a good thing to leave to the next generation is that unused funds have generally sat outside your estate for inheritance tax. That is the part that changes.

From 6 April 2027, unused pension funds and lump sum death benefits are brought into your estate for inheritance tax. Where inheritance tax is due, the rate on the value above the available nil-rate band is 40%. And here is the point that hits grandchildren specifically: the spouse and civil partner exemption, which lets a pot pass to a husband or wife free of inheritance tax, does not extend to grandchildren. There is no equivalent relief for them at all.

Source: HM Treasury and HMRC, Inheritance Tax on unused pension funds and death benefits (2027-28).

So from that date a pension left to a grandchild can face two layers rather than one. The pot may be reduced by inheritance tax as part of your estate, and then, if you died at 75 or over, the grandchild pays income tax at their marginal rate on what is left when they draw it. That is not a reason to abandon the plan — a pension can still be a sensible thing to leave grandchildren, and the ability to spread income over years remains valuable — but it is a reason to look at the numbers again with current rules in mind, rather than relying on advice given before the change was announced. Where grandchildren are being brought in alongside step-relationships, the same care over who legally counts as your descendant applies, as we set out in do I need to adopt my stepson to leave him the house.

Generation-skipping, and why people do it

Leaving a pension straight to grandchildren rather than to your children is sometimes a deliberate choice, not an accident. If your own children are comfortable, passing wealth directly to grandchildren skips a generation in which it might otherwise be taxed again on your child's later death. A pension has been a particularly clean way to do that, because of the tax position and because it passes under the scheme's discretion rather than through the will.

The 2027 change reduces, but does not remove, that logic. The pension no longer sits neatly outside inheritance tax, so the headline saving is smaller. What survives is the ability to keep the money working inside a pension for a young beneficiary and let them draw it efficiently over time. Whether the trade still makes sense for your family is a numbers question now rather than an obvious yes, and it is worth modelling both routes before deciding. Marriage can also change who counts as a survivor and how much passes tax-free, which is worth understanding before you fix the split — we cover it in whether getting married changes what your partner inherits.

If the pension is not enough on its own

A pension is only one of the ways to leave money to grandchildren, and it is not always the tidiest, especially where inheritance tax now bites and where your age at death drives the income tax bill. For a defined amount that lands cleanly and outside your estate, a life policy written in trust for named beneficiaries can be a simpler instrument, and it is not exposed to the pension-specific rules above.

You can get life insurance quotes and have an FCA-authorised broker look at how cover and pension might work together, rather than leaning on the pension alone. If your provision runs through work rather than a personal policy, it is worth checking that life periods around family leave are covered as you expect, which we look at in shared parental leave and your work life cover.

Scotland and Northern Ireland

The pension tax rules here — nominee and dependant status, the age-75 income tax point, and the inheritance tax change from April 2027 — are set by HMRC and apply across the UK, so the substance of this page holds wherever your grandchildren live.

What differs is the law around wills and succession, which sits alongside the pension rather than governing it. Scotland has its own rules of intestacy and of children's rights in an estate, and Northern Ireland has its own succession law again. Because a defined contribution pension usually passes under the scheme trustees' discretion rather than through your will, those differences do not normally change who gets the pot — but they can change what happens to the rest of your estate, and to anything the pension does not cover, so a will drafted under the right law still matters.

Frequently asked questions

Can I name a grandchild as my pension beneficiary?

Yes, on most defined contribution arrangements. A grandchild who is not financially dependent on you is a nominee rather than a dependant, and can only receive anything if you have actually named them, so the expression of wish form has to be completed and then kept up to date. Naming them also opens the option of keeping the money inside a pension for them rather than paying a single lump sum.

How is a pension left to a grandchild taxed?

It depends on your age when you die. If you die before 75 and the benefit is paid or designated within two years, it is normally free of income tax. If you die at 75 or over, your grandchild pays income tax at their own marginal rate on what they take, which is why drawing it gradually over several years can leave more of it intact than taking it all at once.

Will my grandchildren pay inheritance tax on my pension?

From 6 April 2027 unused pension funds are counted as part of your estate for inheritance tax. There is no exemption for grandchildren, unlike the one applying between spouses and civil partners, so their share can be reduced by inheritance tax before any income tax they then pay. It is worth reviewing any plan made before the change against the new position.