Resources & Insights

Inheriting a Pension as an Expat: What You Need to Know

By QROP Direct Editorial Team · Reviewed by an independent regulated pension specialist · Reviewed 2026-06-10

Inheriting a Pension as an Expat: What You Need to Know

Inheriting a UK pension as a non-UK resident is more common than most people realise. As the UK expat population ages, an increasing number of beneficiaries — themselves living abroad — will receive pension death benefits from deceased parents, spouses, or other family members.

This guide explains how the death benefit rules work for UK SIPPs and QROPS, the tax implications for overseas beneficiaries, and the practical steps involved.

This guide is for information purposes only and does not constitute financial, tax or legal advice. Pension inheritance involves complex tax interactions. Seek qualified advice in both the UK and your country of residence.

Key Takeaways

• Nomination of beneficiaries is discretionary — trustees decide who receives the benefit, guided by nomination forms
• Under 75 lump sum: Currently tax-free from UK income tax for most beneficiaries
• Over 75 lump sum: Subject to UK income tax at the beneficiary's marginal rate
• Overseas beneficiaries must also consider local tax on the inherited pension
• From April 2027: IHT changes will affect pension death benefit planning
• Beneficiary drawdown is an alternative to a lump sum — the inherited pension continues to grow tax-sheltered

How SIPP Death Benefits Work

When a SIPP member dies, the scheme trustees (or in the case of most personal SIPPs, the platform acting in a trustee capacity) must decide who receives the death benefit. This decision is made at their discretion, guided by:

1. The nomination of beneficiaries form — the member's expression of wishes
2. The scheme rules
3. Any other relevant circumstances (family situation, known wishes)

The discretionary nature of the payment is what historically kept pension death benefits outside the IHT estate — because the trustees, not the member, technically own the pension and exercise discretion over its distribution.

Practical implication: Keeping a current and up-to-date nomination form is essential. If the nomination form names an ex-spouse or a person who has since died, the trustees must decide without clear guidance. Update nominations whenever your circumstances change.

Death Benefit Options for Beneficiaries

When a SIPP member dies, the nominated beneficiaries typically have two options:

1. Lump Sum Payment

The entire pension fund (or the deceased's share of it) is paid as a lump sum. This is the simplest option — the money leaves the pension wrapper and becomes the beneficiary's own funds.

Tax treatment (UK): - Member died under 75: Lump sum is generally free of UK income tax (subject to the Lump Sum and Death Benefit Allowance — LSDBA — of £1,073,100) - Member died aged 75 or over: Lump sum is subject to UK income tax at the beneficiary's marginal income tax rate

Tax treatment (overseas): This depends entirely on the beneficiary's country of residence and its domestic tax rules and DTA with the UK. Some countries may treat the lump sum as income; others may have specific inheritance provisions.

2. Beneficiary Drawdown (Continuing the Pension)

An alternative to a lump sum, beneficiary drawdown allows the inherited pension to remain within the pension wrapper and continue to grow tax-sheltered, with the beneficiary drawing income as needed.

Advantages: - The pension continues to benefit from tax-free growth within the wrapper - Income can be drawn flexibly at any time - The remaining fund passes to the beneficiary's own nominated beneficiaries on their death (continuing the multi-generational pension cascade)

Availability: Beneficiary drawdown must be established within 2 years of the scheme administrator first becoming aware of the death. After 2 years, the only option is a lump sum.

For overseas beneficiaries: The availability of beneficiary drawdown depends on whether the SIPP provider accepts non-UK residents as drawdown beneficiaries. Not all providers do. This should be confirmed with the provider promptly.

The Lump Sum and Death Benefit Allowance (LSDBA)

Since the LTA was abolished in April 2024, the relevant limit for death benefit lump sums is the LSDBA: £1,073,100 (Source: Finance (No.2) Act 2023, gov.uk, 2026).

This is the combined total of all tax-free lump sums (including PCLS taken in life and death benefit lump sums). If the deceased took a PCLS of £268,275 during their lifetime, the remaining LSDBA for death benefit lump sums is £1,073,100 - £268,275 = £804,825.

For death benefit lump sums above the LSDBA, the excess is taxable as income in the beneficiary's hands (at the beneficiary's marginal rate, not a flat 55% as under the old LTA regime).

QROPS Death Benefits

If the pension is a QROPS, the death benefit rules depend on:

1. Whether the member is within the 10-year HMRC reporting window: If so, death benefit lump sums above the LSDBA are potentially subject to UK income tax
2. The QROPS jurisdiction's own rules: The scheme must comply with its own jurisdiction's pension regulations
3. After 10 years: The QROPS is entirely outside HMRC's jurisdiction; death benefits are governed by the scheme rules and jurisdiction only

For beneficiaries receiving a QROPS death benefit, the interaction of UK HMRC rules (if within the 10-year window) and the local jurisdiction rules requires careful advice.

Practical Steps for Beneficiaries

If you are named as a beneficiary on a SIPP nomination form:

1. Notify the scheme promptly. Contact the SIPP provider as soon as possible after the death. Provide the death certificate. The scheme will pause any drawdown instructions and initiate the death benefit process.

2. Request the scheme's death benefit options in writing. Ask the provider to confirm what options are available — lump sum, beneficiary drawdown, or both. Confirm whether they accept non-UK resident beneficiaries for drawdown.

3. Take tax advice before electing. Before choosing between lump sum and drawdown, understand the tax implications in both the UK and your country of residence. For large pensions, the difference in lifetime tax liability between a lump sum now versus staged drawdown over many years can be significant.

4. Complete the required forms. The scheme will typically require identification documents, proof of relationship, and election forms. Non-UK residents may need certified copies of identity documents.

5. Declare the inheritance in your local tax return. Even if the UK does not tax the lump sum, you must declare it in your country of residence. Failing to declare an inherited pension lump sum is a tax compliance issue.