In Pierced for Our Transgressions: Rediscovering the Glory of Penal Substitution, the authors respond to a question a reader might have in regards to penal substitution:
The question might arise [as to] how believers seen by God as forensically innocent by virtue of Christ’s penal substitutionary death for them should nonetheless suffer in various ways. If ‘the wages of sin is death’ (Rom. 6:23), and Christ has borne for believers the whole of this penalty, why do we still die? … And what do we do with those Bible passages that speak of God disciplining his children when they sin (e.g. Heb. 12:5-11)? Does this mean that there is a punishment still outstanding, which we must pay ourselves? Of so, this would seem to present serious problems for penal substitution.
The answer in both cases is that the Bible does not conceive of painful experiences that come upon Christians as punishment of a retributive or judicial kind. Quite the opposite. As the old hymn puts it, death, though not a good thing in itself, has become for Christians ‘the gate of life immortal’. Its character is transformed. Though the experience may still be intensively painful, it serves a good end. Indeed, it may even be conceived as a blessing from God. The apostle Paul confessed that ‘to die is gain’, since it would be ‘to depart and be with Christ, which is better by far’ (Phil 1:21, 23), and the prophet Isaiah saw that in death ‘the righteous are taken away to be spared from evil’ (Isa. 57:1).
The case of discipline is similar. Although the experience, from our perspective, may be indistinguishable from retribution, and although the biblical vocabulary is the same (both are termed ‘punishment’), from the standpoint of God’s intention they are entirely different. God’s intention in retribution is to punish the guilty for the sake of his justice. It is, and will be on the Last Day, a manifestation of his wrath against those who stand rightly condemned (Rom. 1:18; 2:5). But ‘there is … no condemnation for those who are in Christ Jesus’ (Rom. 8:1). Discipline is a sign not of God’s wrath but of his fatherly affection, for ‘the Lord disciplines those he loves, and he punishes everyone he accepts as a son’ (Heb. 12:6). In fact, discipline is precisely the opposite of wrath in this sense: in Romans 1:18-32 God responds in anger to people’s sin by withdrawing his restraining hand and leaving them to it. By contrast, when he sees his children sinning, he may mercifully apply his restraining hand to keep them from it.
For the believer, the whole character of suffering and death is transformed because God’s purpose for them in these things is different because of their union with Christ in his penal substitutionary death. Not wrath, just loving discipline; not wrath, but “the gate of life immortal.”