The pension rules on death

Four years ago, the pension freedoms were introduced, affecting those with defined contribution (money purchase) pension schemes. At the same time, the rules around what happens to a person’s pension on death also changed.

Legislation now means that anyone can benefit from your pension when you die, but not all pension schemes actually allow this rule to be administered.

Just because legislation changed pension providers did not need to update their contracts to facilitate the change in rules. The reality means that many people believe they have full flexibility over their death benefits and will benefit from the change in rules, but this may not be the case, so unless the rules under your specific arrangement have been updated you will not have full flexibility.

The only way to be sure is to check with your provider, but it is important to find out as soon as possible. Most importantly, you should ensure that your death benefit nomination (or expression or wish) has been updated to reflect who you would like to benefit from your pension when you die. This may not guarantee the wish, but it will certainly help inform the pension trustees who you want to benefit. They’ll still have to process it under the scheme rules, but at least it will put the money in the hands of the person(s) that you wanted it to.

Should family circumstances be more complex there are strict rules around how and when money should be paid from your pension benefits when you die, so you may wish to consider the use of a trust.

For independent retirement planning advice, please contact our financial planning team at any office near you across Cumbria, Northumberland, Yorkshire and Scotland.

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