If you die before taking any of your pension, your loved ones could get some money.
People who get money from your pension after you die are called your beneficiaries. You can usually tell your pension provider who you want your beneficiaries to be. Or your beneficiaries may automatically be the people who depend on you financially (your dependants).
The money may be paid as one or more lump sums. In some cases, these payments may be tax free:
- If you die before you are aged 75, your beneficiaries can take lump sums tax-free within 2 years of your death.
- If you die aged 75 or over, your beneficiaries will have to pay Income Tax on the money they get.
Make sure your pension provider has up-to-date details of your beneficiaries. If you have more than one pension, let all your providers know. You can do this by completing an expression of wishes or nomination form. You can get these from the provider. You need to do this even if you have already written your wishes in your will.
Defined contribution scheme
If you have a defined contribution scheme, the value of the lump sum your beneficiaries can get is usually based on the value of the savings you have built up. Sometimes this might just be a refund of the contributions paid in, so it is important to check with the provider. Your beneficiaries may choose to take an income instead, or a combination of both.
Defined benefit scheme
If you have a defined benefit scheme, a lump sum may be paid to your beneficiaries if you die before taking your pension. It is important to check with the individual scheme how much would be paid.