While not a topic many want to face, knowing the answer to ‘what happens to my Pension when I die?’ is vital to understanding the management of your funds and how you can better prepare your assets. So, what does happen to your Pension when you die?
The three routes your Pension could take
Your Pension will usually take one of three courses after your death.
If you had a next of kin listed on your Pension Scheme file, it will likely go to them. Whether this is a parent, a spouse, an ex-partner or a child, your next of kin will be the first person considered when allocating your Pension funds.
If you don’t have a next of kin or have specific instructions in place to avoid your assets going to them, your funds could be paid to your Estate and handled as part of your Will, however this will depend on what your Will instructs.
Or finally, your assets could be left to those you nominate. Whether you nominate your spouse, your children, other relatives or close friends, you would be able to decide what proportion of your funds each nominee receives. This is where a Pension Trust may prove valuable if you want to safeguard your assets for the future.
While these are the three most common routes your Pension could take, we would recommend you set up an Expression of Wish if you want a final say in the outcome of your Pension.
Find out more about Wills and Trusts.
Do I need a Pension Trust?
Whether you have a Workplace Pension or a Personal Pension, having a Pension Trust effectively acts as an extra layer of protection for your contained assets.
With a Pension Trust, your Pension funds will be managed by a team of designated Trustees who will safeguard your assets against future events. If family members separate or become bankrupt, the trustees will ensure your funds stay within your bloodline across generations.
While not a requirement, a Pension Trust simply adds extra protection to your assets once you are no longer able to dictate where they are allocated.
What is an Expression of Wish?
An Expression of Wish, otherwise known as a Death Benefits Nomination or Nomination of Beneficiary, allows you to nominate who you’d like your benefits to be paid to in the event of your death. While it isn’t binding or a set guarantee, an Expression of Wish ensures your judgement will be taken into consideration when making decisions around your Pension.
Once you have set up an Expression of Wish, it is important to regularly update it. Whether you go through a divorce, get married, or have a new child born, you’ll want to remember to update your Expression of Wish to include those you most want your Pension to be left to when you die. In the event you don’t update these details, your funds may be left to ex-partners or people you are no longer in touch with.
Now you know the answer to ‘what happens to my Pension when I die?’, feel free to contact Penguin Wealth for guidance on setting up your Pension and managing your assets.
Or, book your Discovery Meeting at our expense.