Pension Death Benefits Calculator
Calculate the tax on pension death benefits for 2025/26. Model DC pension lump sums and drawdown (tax-free under 75, taxed at 75+), DB spouse and children's pensions, and the impact of the April 2027 Inheritance Tax change on pension pots.
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How to Use This Calculator
DC Pension tab
Enter the pension pot value and the age of the member at death. If the member died before age 75, the pension passes tax-free to beneficiaries (within the Lump Sum and Death Benefit Allowance of £1,073,100). If the member died at 75 or over, enter the beneficiary's annual income — the pension will be taxed at their marginal income tax rate. Choose between a lump sum payout or inherited drawdown. If the beneficiary is a spouse or civil partner, the calculator also shows the Bereavement Support Payment they may be entitled to claim.
DB Pension tab
Enter the member's annual pension and the spouse pension rate from the scheme rules (commonly 50% or two-thirds). Add the number of eligible children to see their pension entitlement. If the scheme includes a lump sum death benefit, enter the member's salary and the salary multiple (typically 2x to 4x). The calculator shows the total annual and monthly income the surviving dependants will receive. Note that DB pension income is taxed as earned income at the beneficiary's marginal rate — the calculator shows the gross income payable by the scheme.
April 2027 IHT tab
Enter the estate value excluding the pension and the DC pension pot. The calculator shows your estimated Inheritance Tax under current rules (where pensions are fully exempt) and under the April 2027 rules (where the unused pension is added to the estate). It applies the Nil Rate Band (£325,000) and, where applicable, the Residence Nil Rate Band (£175,000) to both scenarios so you can see exactly how much more IHT will be due because of the change.
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The Formula
UK pension death benefits use different rules depending on the type of pension, the age of the member at death, and from April 2027, the size of the estate:
Lump sum tax-free up to LSDBA (£1,073,100)
Amount above LSDBA × Beneficiary's marginal income tax rate
Inherited drawdown: fully tax-free (no LSDBA cap on drawdown income)
DC Pension — Death at 75 or Over:
Tax payable = Pension benefits paid × Beneficiary's marginal income tax rate
(20% basic / 40% higher / 45% additional rate — 2025/26)
DB Pension — Spouse and Children:
Spouse pension = Member's pension × Scheme spouse rate (e.g. 50%)
Children's pension = Member's pension × Per-child rate (scheme-specific)
Lump sum death benefit = Salary × Multiple (typically 2–4×)
April 2027 IHT Impact:
Estate (including pension) − Nil Rate Band (£325,000) − RNRB (up to £175,000)
IHT = Taxable estate × 40%
Additional IHT = IHT (with pension) − IHT (without pension)
The two-year rule for DC pensions is critical: lump sum death benefits paid more than two years after the scheme administrator first knew of the death are taxed at the beneficiary's marginal rate, even if the member died before 75. Inherited drawdown is not subject to this two-year rule.
From 6 April 2027, unused pension funds become part of the taxable estate, but pensions passing to a surviving spouse or civil partner remain exempt from IHT via the unlimited spouse exemption.
Example
Robert, 68 — Software Engineer, married with two adult children
Robert has a £300,000 SIPP and a DB pension paying £15,000/year. His estate (house and savings) is worth £500,000. He wants to understand what his wife Sarah and children will receive.
DC pension (SIPP) — Robert dies at age 68 (before 75)
Alternatively, Sarah could take the SIPP as inherited drawdown — also fully tax-free since Robert died before 75.
DB pension — spouse and children
April 2027 IHT impact
Robert's estate currently pays no IHT because the estate (£500,000) is fully covered by the NRB (£325,000) and RNRB (£175,000), and the pension is exempt. From April 2027, the £300,000 SIPP is added to the estate, pushing the total to £800,000 and creating an IHT bill of £120,000 on the pension element. However, if the SIPP passes to Sarah (a surviving spouse), the spouse exemption means no IHT is due.