Dying abroad does not by itself change who can inherit your UK pension. Under UK pension rules in 2026/27, the scheme pays death benefits under its own rules, usually guided by your nomination, to beneficiaries wherever they live. What can change is the tax, which depends on your age at death and, for deaths on or after 6 April 2027, how the new inheritance tax rules apply to your pension and residence history.

Who receives the money

For most defined contribution pensions, such as personal pensions and SIPPs, the scheme administrator decides who receives death benefits. They normally take account of your expression of wish, but the decision is often discretionary. Beneficiaries do not need to be UK resident.

For a defined benefit (final salary) scheme, benefits are set by the scheme rules, typically a pension for a spouse, civil partner or dependent children, and sometimes a lump sum.

Your country of residence does not usually decide who receives a UK pension, but local succession and tax rules can affect what your beneficiaries pay.

Income tax for beneficiaries

The broad UK position is the same wherever you die.

  • Under 75 at death. Most lump sums can be paid free of UK income tax if paid within two years of the scheme being told of the death and within your Lump Sum and Death Benefit Allowance (£1,073,100 for most people). Some payments, such as annuities or income from older drawdown funds, can still be taxed.
  • 75 or over at death. Payments are generally taxed as the beneficiary's income.

A beneficiary living abroad may also have tax to pay in their own country, depending on local rules and any double tax treaty.

The April 2027 inheritance tax change

At present, most pension death benefits sit outside your estate for inheritance tax. For deaths on or after 6 April 2027, legislation is intended to bring most unused pension funds and certain pension death benefits into the inheritance tax calculation, subject to exclusions (such as certain death in service benefits and dependants' scheme pensions) and detailed rules still being finalised. The treatment depends on the type of arrangement, the member's long-term UK residence status and the nature of the benefit. Amounts passing to a spouse, civil partner or charity can remain exempt.

HMRC's policy paper says personal representatives will be responsible for reporting and paying any tax, and can ask the scheme to hold back 50% of benefits for up to 15 months.

If you die aged 75 or over, both inheritance tax and income tax may be relevant. How the two interact depends on the final rules and guidance. Our guide to inheritance tax on pensions from 2027 covers this in detail.

Does living abroad help?

For many individuals, the domestic inheritance tax test now focuses on long-term UK residence rather than domicile. Domicile remains relevant in some treaty, transitional and anti-avoidance contexts. Long-term UK residence generally means UK tax resident in at least 10 of the previous 20 tax years. After you leave, the status can continue for a "tail" of 3 to 10 years depending on your UK residence history. The count is based on UK tax-residence years, and HMRC guidance says a split year counts as a full year of UK residence for this purpose.

The legislation treats pension property as situated where the scheme is established. A UK registered pension is therefore UK property, which can be within inheritance tax whatever your residence status, subject to exemptions and reliefs. Moving abroad alone does not take a UK pension out of scope from April 2027. Our guide to inheritance tax for UAE resident UK nationals explains the residence test.

A worked example

Illustrative example only, not a real client.

Mark, aged 68 and living in Dubai, dies in May 2027 with £400,000 in a UK SIPP and other assets of £600,000. His nomination names his two adult children. Assume he is unmarried, all his assets are within UK inheritance tax, only the £325,000 nil rate band is available (no residence nil rate band, no lifetime gifts) and no other reliefs apply.

  • Estate including the SIPP: £1,000,000. Tax at 40% on £675,000 = £270,000.
  • Without the SIPP, the tax would have been 40% of £275,000 = £110,000, so the pension adds £160,000 under these assumptions.
  • Because he died before 75, lump sums paid to his children within two years and within his allowance would generally be free of UK income tax.

Had Mark died before 6 April 2027, the SIPP would usually have been outside his estate.

Common mistakes

  • Never updating a nomination after marriage, divorce or children.
  • Assuming non-residence takes a UK pension outside inheritance tax.
  • Missing the two-year payment window where death is before 75.
  • Not telling family where pension paperwork is kept.

A regulated financial adviser can help. Get in touch for a free introduction.

Sources and further reading

Last reviewed: October 2026. Tax year: 2026/27, with rules for deaths on or after 6 April 2027. Jurisdictions covered: UK. Rates, legislation and guidance change, so recheck before relying on this. Rules can differ between England and Wales, Scotland and Northern Ireland; tax residence is fact-specific; treaty outcomes depend on residence, domicile or nationality provisions; examples are simplified and omit reliefs, costs, exchange rates and anti-avoidance rules. This is general information, not financial, tax or legal advice. Take advice in the relevant country before acting.