Ensuring the right person gets your pension when you’re gone
When a member of a pension scheme dies, the people they leave behind may be entitled to valuable benefits. This can be in the form of a regular pension, a lump sum, or both, depending on the type of pension scheme they were part of. But who gets those benefits?
At the time many pension schemes were set up, and people got married and stayed married to that person for the rest of their lives. However, these days we may marry, divorce, re-marry, cohabit, or remain single. This means it is far less obvious ‘who’ should receive benefits from our pension scheme when we are gone.
If we do not tell our pension scheme about our wishes and our current family circumstances, there is a risk that the person who benefits is not the person we would have wanted.
Do your pension providers know who you would want to benefit after you are gone?
What happens on death depends on what type of scheme you are part of (e.g. Defined Benefit or Defined Contribution), the scheme rules, and whether you had started to receive benefits from the pension, or not.
Defined Benefit schemes tend to have a prescribed basis, offering the member very little choice. However, for defined contribution schemes the legislation allows various options; but you need to ensure the pension plan you are in facilitates the option that suits your circumstances best.
Pension schemes will have different procedures for how they allocate benefits upon death. However, generally, when you join a scheme you will be asked to fill in an Expression of Wishes form which allows you to nominate who you would like to receive your death benefits when you die.
In the past, pension benefits were usually paid to dependants, but the legislation now allows much more flexibility over who can inherit your pension.
A dependant – some who is financially dependent on the person who dies (spouse, civil partner, child who is still in full time education)
A nominee – someone who is nominated, but who is not necessarily dependant (someone that co-habits, adult child, friend)
A successor – someone who is named by a dependant or nominee to inherit the pot when they die.
Benefits do not have to be paid to just one person, a number of people could benefit.
According to the Department for Work and Pensions, the average person may have up to 11 different jobs over the course of their working life meaning there could be multiple pension schemes to manage. It is therefore important that all Expression of Wishes forms are kept up to date for all pensions that you have.
In summary, this is potentially a complex area of planning and it’s worth seeking professional financial advice to make sure you get it right.
For further information or to arrange an initial no-obligation consultation at our offices or another mutually convenient location, please telephone us on 01772 729 742, or alternatively, simply fill out our online enquiry form and we will give you a call to discuss your requirements.