This guide is for financial advisers only. It must not be distributed to, or relied on by, customers. The information on this page is based on our understanding of legislation as at 21 April 2026.
Discretionary beneficiaries
If no individual trust is in place on a member’s policy, scheme rules will generally provide that any death benefits are payable at the discretion of the scheme administrator/trustees. The scheme administrator/trustees will decide who is to receive the death benefits from the list of possible beneficiaries in the scheme rules.
Common beneficiaries are the member’s spouse, civil partner and other dependants or relatives but can also be charities, trusts and legal personal representatives.
Current position - up to 6 April 2027
Where the scheme administrators or trustees have the power to make a discretionary decision, the death benefits will not normally form part of the deceased member’s estate for Inheritance Tax (IHT) purposes. This applies whether the lump sum is paid to one or more beneficiaries, or to the estate. See ‘Inheritance tax (IHT)’ for more information.
Scheme rules may allow the member to nominate, in writing, who they would like to receive the death benefits. This request, sometimes referred to as an ‘expression of wish’ or ‘death benefit nomination’, is not legally binding on the scheme administrator or trustees, who will exercise their discretion after gathering information from various sources.
Individuals who complete an expression of wish should review it regularly, to consider any changes in their personal circumstances (for example, marriage or divorce, the birth of another child or the death of an existing nominee). Benefits paid to individuals nominated in an expression of wish form will not normally form part of the deceased member’s estate for Inheritance Tax (IHT) purposes.
Scheme rules may alternatively (or additionally) allow the member to nominate, in writing, who they want to receive the death benefits. This request is legally binding on the scheme administrator or trustees. With these binding nominations, the death benefits will form part of the estate and therefore may be subject to IHT.
It’s worth noting that pension contracts in the member’s own name – e.g. section 32 (buyout) policies, section 226 retirement annuity contracts and policies assigned from occupational pension schemes – generally pay any death benefits directly to the member’s estate. As a result, the death benefits would be considered for IHT. This can be avoided if the contract is placed in trust.
Changes from 6 April 2027
From 6 April 2027 most pension death benefits will form part of an individual's estate for IHT purposes. You can read about the changes in our Inheritance tax and pensions article.