14
Nov 2025

Pensions, death in service benefits & inheritance

Following the death of a loved one, disputes often arise when family members or dependants disagree over who should benefit from payments that might be made by pension trustees or an employer. These disputes can easily become acrimonious when a deceased person’s personal life is complicated or any wishes expressed are unclear or contested.

A pension is a public or private savings plan that is intended to provide a regular income on retirement. National Insurance Contributions help to fund the state pension which becomes payable on the applicable retirement age and ceases on the death of the person making the contributions. Additional contributions, usually from an employer and / or employee, fund private pensions which usually become payable on the applicable retirement age but often have third party benefits that survive the death of the person making the contributions.

Examples of private pension benefits that might be paid to a third party are a continued income to a partner or a lump sum payment to a dependant. Unless pension funds have been used to purchase an annuity – an income for the life of the contributor and, possibly, their partner – they will usually be held in a discretionary trust. The person who has made the contributions can tell the pension trustees who they would like to benefit on their death. Although that expression of wishes is usually followed, the pension trustees can exercise their discretion to benefit others unless the policy permits a binding nomination to be made.

If private pension benefits are to be paid to a deceased person’s estate, they will form part of the deceased person’s estate. However, private pension benefits paid to others do not form part of the deceased person’s estate.

A death in service benefit is unrelated to a pension. It is a tax-free, lump-sum payment provided by an employer to a third party if an employee dies whilst employed. This benefit functions like a life insurance policy and is similar to a pension only insofar as the employee can tell their employer or associated trustees who they would like to benefit on their death and, again, although that expression of wishes is usually followed, the employer can exercise their discretion to benefit others.

Therefore, those making private pension contributions or who are a member of a death in service scheme should consider making an expression of wishes unless they have already done so and those who might expect to receive pension or death in service benefits should be ready to alert the relevant trustees as to their circumstances as soon as a death occurs and before any payments are made.

Simon Ingham qualified as a solicitor in Scotland and now practises in England. He is a partner who specialises in Inheritance, Probate, Trust & Will disputes. If you have a dispute in England & Wales that relates to: