Death Benefits

What happens to your pension when you die?

If you die, the full value of your pension fund will be available to your beneficiaries. The funds are held within a flexible trust, which ensures that they don’t form part of your estate for inheritance tax purposes. You can nominate beneficiaries using your online account, but remember that death benefit nominations are not binding on the trustees – this ensures that any payments fall outside of your estate.

Taxation – death before age 75

If you die before age 75, any funds are paid out without any tax liability on the beneficiaries, provided that they are paid within 2 years of your death. If they are paid more than 2 years following the date of death, the beneficiaries are subject to income tax at their highest marginal rate.

Taxation – death after age 75

If you die after age 75, death benefits are subject to income tax at the beneficiaries’ highest marginal rate.

Who can receive death benefits?

Anyone can receive lump sum death benefits – there are no restrictions on the type of beneficiary.

If benefits are paid as income, the beneficiaries must either be dependants, nominees, or successors.

A dependant can be:

– a spouse or civil partner
– a child under the age of 23
– an older child who is dependant due to physical or mental impairment
– someone in a legal, financial dependant relationship

A nominee can be anyone nominated by the member. It is important therefore that you do update the nomination section of your account, via the online portal.

A successor can be anyone else, nominated by any of the parties above.

The importance of taking advice

The sections above give an overview of the position on death. However, as you can see, the situation can be complex and depends on your own individual circumstances. We recommend that you seek appropriate advice if you need clarification and particularly if you also have other pensions to take into account.