Nobody likes thinking about it, but here’s a question I get from UK expats in Portugal more often than you’d expect: “What actually happens to my pension if I die?” It’s one of those topics that sits awkwardly at the intersection of money and mortality — and yet getting it right could save your family tens of thousands of pounds and months of unnecessary stress.

If you’re a British expat living in Portugal with UK pension pots, the rules around death benefits can be surprisingly complex. Your pension doesn’t just “pass to your spouse” automatically — the type of pension you have, your age when you die, and whether you’ve already started drawing from it all affect what your beneficiaries receive and how much tax they’ll pay. This guide breaks down exactly what happens, what your options are, and the steps you should take now to make sure your family is protected.

How UK Pension Death Benefits Work for Expats

The first thing to understand is that UK pension death benefits are governed by UK rules, regardless of where you live. Moving to Portugal doesn’t change the fundamental mechanics of how your pension pays out on death — but it can change the tax treatment, which is where things get interesting.

There are two broad categories: what happens if you die before age 75, and what happens if you die after age 75. This distinction matters enormously because the tax consequences are completely different.

If you die before 75, your defined contribution pension pot (the kind most people have — SIPPs, personal pensions, workplace pensions that aren’t final salary) can be passed to your nominated beneficiaries completely tax-free in the UK. That’s the entire pot, whether it’s taken as a lump sum or as ongoing drawdown income. This is one of the most generous aspects of UK pension legislation and it applies equally to expats.

If you die after 75, your beneficiaries can still inherit the pot, but any withdrawals they make will be taxed as income at their marginal rate. For a UK-resident beneficiary, that means paying income tax at 20%, 40%, or 45% depending on their other income. For a Portugal-resident beneficiary, Portuguese tax rates would apply — and thanks to the UK-Portugal Double Taxation Agreement, they shouldn’t be taxed twice on the same money.

Defined Benefit Pensions: A Different Set of Rules

If you have a defined benefit pension (also called a final salary pension), the death benefit rules work differently. These pensions typically pay a spouse’s or dependant’s pension — usually 50% of the pension you were receiving (or would have received) — for the rest of your spouse’s life.

The key points for expats in Portugal to understand about DB scheme death benefits are straightforward but important. Most schemes will pay the spouse’s pension regardless of where they live in the world, which is good news. The pension is typically taxable in the country where the recipient is resident — so if your spouse lives in Portugal, they’ll pay Portuguese income tax on it. Some schemes also offer a lump sum death benefit, but this varies enormously between schemes.

If you’ve transferred your defined benefit pension into a SIPP or QROPS (which many expats do for flexibility), then the defined contribution rules above apply instead. This is actually one of the reasons some people choose to transfer — the death benefit flexibility can be significantly better. That said, transferring a DB pension is a major decision with many factors to weigh, and it’s not right for everyone. We’ve covered this in detail in our guide to DB pension transfers.

The Critical Importance of Nomination Forms

Here’s something that catches a lot of expats off guard: your pension doesn’t automatically go to your spouse or children. You need to complete a nomination of beneficiary form (sometimes called an expression of wish) with each pension provider.

Unlike a will, which is a legal document that dictates how your estate is distributed, a pension nomination form is technically just a “wish” — the pension trustees have the final say. However, in practice, trustees almost always follow your nomination unless there’s a very good reason not to.

The problem? Many people fill in these forms once when they start a job at 25 and never look at them again. Divorced and remarried? Your ex-spouse might still be listed. Had children since you last updated? They might not be included. Moved to Portugal and your circumstances have changed? Time to review.

I’d recommend checking your nomination forms at least every two years, and always after any major life change — marriage, divorce, birth of a child, or a significant change in financial circumstances. It takes five minutes and could prevent an absolute nightmare for your family.

Tax on Inherited Pensions: UK vs Portugal

The tax treatment of inherited pensions for expats straddles two jurisdictions, and this is where getting proper advice really pays off.

On the UK side, pension death benefits are exempt from UK inheritance tax (IHT). Your pension pot sits outside your estate for IHT purposes, which is one of the reasons pensions are such a powerful estate planning tool. Note that the UK government has proposed bringing unused pension funds into the IHT net from April 2027, so this is an area to watch closely — the rules may change.

On the Portuguese side, Portugal has a very favourable inheritance tax regime. There’s no inheritance tax as such — instead, Portugal charges Imposto do Selo (stamp duty) at 10% on Portuguese assets inherited by non-direct-line relatives. Spouses, children, parents, and grandchildren are completely exempt. And crucially, UK pension pots are not Portuguese assets, so Portuguese stamp duty generally doesn’t apply to them at all.

The income tax treatment is where it gets more nuanced. If your beneficiary is UK-resident and inherits after you turn 75, they’ll pay UK income tax on withdrawals. If they’re Portugal-resident, the Double Taxation Agreement should ensure the pension income is only taxed in Portugal (where it would be taxed as pension income under Portuguese rules). For those still on NHR or the new IFICI regime, there may be additional beneficial treatment — but this depends on individual circumstances.

Practical Steps to Protect Your Family

Based on my experience working with UK expats in the Algarve and across Portugal, here are the things that make the biggest practical difference.

First, consolidate where it makes sense. If you have four or five small pension pots scattered across different providers, your family will need to contact each one separately when you die. That means multiple claim forms, multiple sets of documentation, and multiple delays. Consolidating into one or two well-managed pots simplifies everything. Just make sure you’re not giving up valuable guarantees by transferring — always check first.

Second, keep a clear record of all your pensions. Create a simple document listing every pension you have, the provider, the policy number, and where the nomination form was sent. Store it somewhere your family can find it. I’ve seen cases where families didn’t even know a pension existed because all the correspondence went to an old UK address.

Third, make sure your will and your pension nominations work together. Your pension sits outside your will, but your overall estate plan needs to account for it. If you’re leaving the pension to your children but the rest of your estate to your spouse, does that balance work? Have you considered what happens if a beneficiary dies before you?

Fourth, consider the age-75 threshold in your planning. If you’re approaching 75 and have a large pension pot, the tax consequences of death change dramatically. Some people choose to draw down more before 75 and gift money to family (subject to the seven-year IHT rule), while keeping the pension pot leaner for the more tax-efficient pre-75 death benefit. This is highly individual and needs careful modelling.

Frequently Asked Questions

Can my Portuguese-resident spouse inherit my UK pension?

Yes, absolutely. UK pension death benefits can be paid to beneficiaries anywhere in the world. Your spouse would need to complete the provider’s claim form and provide the required documentation, including a certified death certificate. The process may take slightly longer than for UK-resident beneficiaries, but it works the same way.

Will my family pay tax twice — once in the UK and once in Portugal?

They shouldn’t. The UK-Portugal Double Taxation Agreement exists specifically to prevent double taxation. Pension income inherited by a Portugal-resident beneficiary is generally taxable only in Portugal, not in the UK. However, the specific treatment depends on the type of pension and how the benefits are taken, so professional advice is important.

What happens to my UK State Pension when I die?

The State Pension has its own rules. Your spouse may be able to inherit some of your State Pension entitlement, depending on when you both reached State Pension age and your National Insurance records. The rules changed significantly in April 2016 with the introduction of the new State Pension. In general, inherited State Pension is more limited under the new system than the old one.

Should I transfer my pension to a QROPS to improve death benefits?

Not necessarily. QROPS can offer some advantages for death benefits, particularly around avoiding the UK tax net entirely, but they also come with costs, potential overseas transfer charges, and different regulatory protections. A SIPP kept in the UK already offers excellent death benefit flexibility. The right answer depends on your specific circumstances, pot size, and goals.

Do I need a Portuguese will as well as a UK will?

While your pension sits outside your will, having both a UK will and a Portuguese will is generally recommended for expats. Your Portuguese will covers your Portuguese assets (property, bank accounts), while your UK will covers your UK assets. Make sure neither will accidentally revokes the other — this is a common drafting error that can cause serious problems.

What to Do Next

The most important thing you can do today is check your pension nomination forms. It’s a small task that could make an enormous difference to your family. After that, if you haven’t reviewed your overall estate plan since moving to Portugal, it’s worth having a proper conversation about how everything fits together — pensions, property, investments, wills, and tax.

If you’d like to discuss how pension death benefits affect your personal situation, get in touch with our team. We specialise in helping UK expats in Portugal make the most of their pensions and investments, and we can coordinate with Portuguese legal advisers to make sure your whole estate plan works seamlessly across both countries.

Matthew Renier is a Chartered Financial Adviser at Arthur Browns Wealth Management, based in the Algarve, Portugal. He has over 15 years of experience helping British expats manage their pensions and financial planning across borders.

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