Death before age 75:
Any lump sum or income payment from the pension, whether from drawdown, annuity or from unvested plans, will be completely free of tax. There is no restriction on who you can nominate as a beneficiary.
Death after age 75:
Any lump sum payment from the pension (whether drawdown, annuity or unvested plans) will be subject to a 45% tax charge in the current tax year and thereafter would be taxed at the beneficiary’s marginal rate.
Where the fund is used to provide income to a beneficiary then this income will be taxed at their own marginal rate. Payments could be made to several beneficiaries, perhaps using their personal allowance or 20% tax band.
If a beneficiary subsequently dies the tax status of any remaining payments will depend on whether they were under or over age 75 at death: if a beneficiary who is receiving taxable income dies under age 75 the remaining fund would become tax-free to their successors.
A beneficiary can nominate anyone as their successor.
Usually, pension funds are free of any Inheritance Tax (IHT).