Pensions On Death

A common misconception when people pass away is that the beneficiaries of their Will will inherit any lump sum, or ongoing, payments from the deceased’s pension. This is not the case as private and occupational pensions fall outside of your estate and the scope of your Will.

Why do I need to worry about my pension?

Many people contribute to a pension for the duration of their entire working life. Since 06 April 2019, workplace pension contributions have been mandatory in the United Kingdom.

Depending on the terms of your pension, the benefits received following your death can be quite considerable, and it is important to consider who is going to receive these.

What happens to my pension when I die?

Pensions do not follow the terms of your Will. Instead, payments are made at the discretion of the Trustees responsible for administering any benefit from your pension.

Who are payments made to?

Discretionary payments are typically made to your dependants or a nominee.

(i)                  What is a dependant?

Qualifying dependants are normally the spouse of the deceased, eligible children (including stepchildren and adopted children) and parties otherwise financially reliant upon you.

(ii)                What is a nominee?

A nominee is a person, or persons, that you have nominated with your pension provider to be the recipient of any payment following death. They do not have to be a dependant; in fact they can be anybody and can even be a charitable organisation.

How do I make a nomination?

We would recommend that you contact your pension provider and ensure that your nominations are up to date. If you have done this previously, but there has been a significant change in circumstances (i.e. a death of your previous nominee, divorce or even a falling out) it is important that you update this.

For example: if you previously nominated an ex-spouse but failed to update your wishes with your pension provider, the Trustees will likely still pay to that individual despite the fact you have since divorced.

If you are uncertain about whether you have nominated a beneficiary of your pension, we would strongly encourage you to contact your pension provider to discuss in further detail.

Do I need to include my pension or nomination in my Will?

No. We would always encourage people to review their Wills periodically, but changing your nominated beneficiary would not warrant an amendment to your Will. As above, any payments under your pension are at the absolute discretion of the Trustees administering your pension. Any provision of your pension in your Will would act no more than an “expression of wishes” with no certainty it will even be considered by the Trustees.

Do Trustees have to pay out to the nominee?

No. The important thing to remember with Trustees is that they have discretion in who they pay to. For instance, if you have a dependant but choose to nominate someone else entirely, the Trustees will consider your dependant in the first instance and what their needs are.

Why bother to nominate a beneficiary?

A nominated beneficiary gives the Trustees guidance in the absence of any dependants on who they should make the payment to. Trustees will always look to honour your wishes where possible, unless there are circumstances that would require otherwise (as above). 

A key example would be unmarried partners. Not all pension providers will consider an unmarried partner as a dependant; in some cases, pension providers will ask for evidence of their financial reliance upon you, but to avoid complications after death it would be best to nominate your unmarried partner.

What is the process when I die?

Your executor, next of kin or another party will contact your pension provider. The pension provider will then provide forms to that person for completion and upon receipt of these, will share it with the Trustees for their consideration. Depending on the contents of the form and any prior nominations made, the Trustees decide who will benefit from your pension and contact that person, or persons, before proceeding to make payment.

I don’t know who my pension is with, what do I do?

Contact your employer in the first instance and they should be able to confirm who your pension provider is.

Do I need a Will if I have nominated my pension?

Depending on what you own and your personal circumstances, we would always encourage you to discuss preparing a Will with one of our specialist team members on 0161 764 5266. Our Wills start from £200 + VAT.

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Contact Clough & Willis

If you need help with Wills, Trust, Lasting Powers of Attorney or any probate matters, Clough and Willis’ expert team of solicitors can help. Call us on 0800 083 0815, or fill in our online enquiry form to arrange a call back at a time that suits you.