Ever wondered, or assumed, what will happen to your pension (or pensions) when you die?
Let’s clarify the misconception
There's a misconception, which is that your pension is simply lost upon death, but depending on the type of scheme that you have, this isn't always the case.
So what actually happens?
State pensions usually stop being paid upon death. In some cases, your spouse or your civil partner can inherit some of the state pension. This will depend on the number of national insurance contributions made and also the age that you reach state pension age.
If you have a defined benefit scheme (known as a final salary scheme or career average) then prior to taking the pension, your beneficiary will receive a lump sum. If you've started to take the pension, then a reduced income may be paid to a spouse, a civil partner, or a dependent under the age of 23.
A defined contribution scheme could be from an employment or a personal pension. If you die before the age of 75 and you've not taken any pension benefits at all, then the amount of money in the pension is passed your beneficiaries, as a lump sum or as an income.
If you have taken an annuity, then if you didn't make provision for a spousal payment, then there may well not be anything due to be paid, and in this case, the remainder of the pension would be lost.
If you're taking flexi access drawdown, the remainder of the pot is passed to your beneficiaries.
This is important…
Your pension is NOT included in your estate, it's not covered by your Will. You will need to tell every scheme what you want to happen (known as nomination of death benefits or an expression of wishes).
If you haven't done this, put that at the top of your to do list!
Book your pension review and financial planning appointment today. Appointments are held in person at our Polegate offices, and we can also offer virtual appointments too.
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The value of pensions and the income they produce can fall as well as rise. The Financial Conduct Authority do not regulate wills, trusts, estate planning and lasting power of attorney. Will Writing & Lasting Powers of Attorney are not part of the Quilter Financial Planning offering and are offered in our own right. Quilter Financial Planning accept no responsibility for these aspects of our business.
