What happens to my pension when I die?

DID you know that after you die any leftover money in your personal pension (SIPP) can be passed onto your loved ones? And that it could also be exempt from inheritance tax?

As is typically the case with pensions there are some caveats, and key differences, depending on the type of pension. Here are some answers to the often asked questions.

What are the death benefits of my personal pension?

Generally, all of what is left of your personal pension can be passed on to your beneficiaries by way of:

1. A single payment to a bank account
2. A Beneficiary Flexi Access Drawdown Self-Invested Personal Pension
3. A Beneficiary Annuity

If Fidelity International administers your personal pension, see page 22 of the ‘Doing Business with Fidelity’ booklet for more details or call our bereavement specialist team on 0800 41 41 16.

Who makes the decision as to who inherits my personal pension?

A board of independent trustees. This means that the final decision as to who your pension may be paid to is not made by your executors, or any members of your family or friends. This is a key misconception with pension investments and something to keep in mind when getting your affairs in order.

How do the board of Independent trustees decide who to pay my pension to?

To make their decision they will review any key information that would guide them towards a decision. Key information would include your expression of wish, your Will, the laws of intestacy (guidelines for if you pass away without a Will) and any other key information. The trustees will also seek confirmation as to who may have been financially dependent on you at the time of your passing. Fidelity has a dedicated team of bereavement specialists who are here to support your loved one(s) through this information gathering process.

How often should I be updating my expression of wish form?

Every time you have a key lifestyle change. We would recommend you review your expression of wish every 2-3 years or after every major life event, such as a marriage, divorce, birth of children, buying a house, new job/pay rise, or change in your financial circumstances.

How do I update my expression of wish?

If you have your personal pension with Fidelity, you can update your expression of wish by completing this form

Will my beneficiaries have to pay tax on my pension death benefits?

There are two indicators that dictate whether your workplace pension will be paid tax free.

1. If you pass away before the age of 75.
2. The benefits are paid out to your beneficiaries within 2 years of the pension provider being informed of your death.

If either of the above, do not apply, then the payment to your beneficiaries’ will become taxable. We always suggest seeking advice from a tax specialist as they will be able to provide you with personalised advice.

Please like and share this article with someone who you think will find it useful and ensure your expression of wish is up to date!

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Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.