If you have spent a lifetime saving for retirement, you will probably like any remaining money to go to a loved one after your death. But whether pension benefits are payable to a beneficiary, and how they will receive them, is dependent on the type of pension you have chosen and how you have accessed it in your retirement.
Income or nest egg for your loved ones
Thanks to changes in the way that pensions are taxed, more of your fund can survive your death and provide an income or nest egg for your loved ones to enjoy, long after you are gone. Since April 2015 it has been easier to safeguard your pension for your heirs, but it is important to make sure you are keeping up with the changes.
The way that you decide to take your pension will affect what you can do with it when you pass away. And while it is not always easy to talk about, the way you eventually pass on your pension has the biggest impact on other people, so it could help if you talk to your spouse, partner, children or other people close to you when you are deciding how you take your pension savings.
Pension death benefits
If you have not yet accessed your pension, or you have made withdrawals from your pension but left some money invested, it can usually be passed to a beneficiary after your death. The specifics, for example, in what form they will receive these death benefits and whether they will pay tax, will depend on your individual circumstances (such as your age) and the scheme rules.
You should always obtain professional financial advice to assess your specific situation. But if your pension scheme allows you to choose a beneficiary, ensure you have named the person you intend to leave your money to.
Annuity death benefits
If you have used your pension savings already to purchase an annuity, this can only be passed on to a beneficiary in certain cases, which must be established when the annuity is purchased. A typical lifetime annuity only provides a guaranteed income for the lifetime of the annuity holder, regardless of how long this is.
For your annuity income to go to a loved one after your death, you must choose either an annuity with a guarantee period (which provides an income for a set period, whether you are still living or not) or a joint life annuity (which provides an income for life for whichever partner lives longest).
State pension inheritance
In certain circumstances, your partner can continue to receive your state pension after your death. For example, if you are a man born before 1951 or a woman born before 1953, and you are receiving the additional state pension, this can be inherited by your partner (husband, wife or registered civil partner) after your death if they have reached the state pension age.
- Children’s pensions
- Defined benefit (or final salary) pensions
- Defined contribution pensions
- Personal pensions
- Self-Invested Personal Pensions (SIPPs)
- The state pension
- Annual allowance and lifetime allowance limits
- Busting myths about pensions
- Increases to pension age and new normal minimum pension age
- Pension freedoms
- Pension withdrawal methods
- The lifetime allowance
- Delaying retirement
- Generating income from investments throughout your retirement years
- Importance of a retirement wealth check
- Retirement goal setting
- Retirement planning
- Reviewing your retirement plan
- Staggered retirement
- Taking control of your retirement plans
- What can I do with my pension?
- What happens to my pension on death?
- Market timing
- Minimising risk
- Multiple asset classes
- Portfolio insulation
- Pound cost averaging
- Principles of investing
Growing your wealth
Goals based investing
- Cash flow modelling
- Creating a financial roadmap
- Investment objectives
- Timescales and market activity and the impact of losses
- ‘What if’ scenarios
- Discussing legacy planning with your loved ones
- Inheritance Tax (IHT)
- Inheritance Tax Residence Nil Rate Band (RNRB)
- Lasting power of attorney
- Lifetime transfers
- Making a Will
- Preserving wealth for future generations
- Protecting your assets for the next generation
- Slicing up your wealth pie