Providing for loved ones

Have you ever wondered about what happens to the money you have saved into your pension if you die before you retire from work?

We all know how important it is to write a will. Doing so means that your loved ones, family, and friends can be looked after if the worst happens and that your assets are passed on in the way you want. 

However, your pension savings don’t automatically count as part of your estate in your will, like other assets you might own would do. What this means is that the trustees of the pension scheme will be the ones to decide how your pension savings will be shared, should the worst happen.

What do I need to do?

You should therefore let your pension provider know what you would like to happen to your pension savings if you die before taking them. The good news is that it’s quick and easy to let us know – you just need to add your beneficiaries in your Smart Pension account. We’d also recommend that you check your beneficiaries every couple of years or so and take the opportunity to update it as necessary.

Why it's important to stay up to date

It’s essential to review your beneficiaries regularly, especially if your circumstances change. Significant life events such as marriage, the birth of a child, or a change in relationship status can alter your priorities for who should receive your pension savings. Keeping your beneficiaries up to date ensures that your pension will be distributed according to your wishes, rather than relying on trustee discretion.

Tax benefits and protection for your loved ones

Another key aspect to consider is that passing on your pension savings can often be done free from inheritance tax. This can provide your loved ones with financial support in a more tax-efficient way, ensuring that they benefit from the full value of your pension savings. Depending on the age at which you pass away, the pension savings can either be passed on tax-free or taxed as income when your beneficiaries access the funds. It’s worth discussing your options with a financial adviser to understand the most beneficial approach for your personal circumstances.

Doing so will give you the peace of mind that your pension savings will be passed on in the way you want. 

Find more ways to plan for your retirement here.

Final thought

This information is for guidance purposes only and is not financial advice. If you need financial advice you can locate a regulated financial adviser on the MoneyHelper website. Where we provide links to third-party websites we are not responsible for their content, so it's important for you to carry out your own independent research.