Talking about wealth and death can be difficult
Most pensions provide some form of death benefit. Unless you have a very old-style pension, or have purchased a single life annuity, there will be options to leave your money to loved ones.
Pension Death Benefits
If you have a DB scheme or final salary pension, it may have restrictive death benefits. Typically, DB schemes only offer death benefits to dependent children (until they reach age 18) or a spouse/civil partner. If that doesn’t fit your wishes, review your pension arrangement and consider a private plan.
If you have a private pension, such as a SIPP or QROPS, you will have total flexibility and control to nominate loved ones to receive death benefits. You can do this using a simple death nomination form. You can change death benefits with a simple form, too.
For UK residents holding a private or DC pension, the fund value is available as a death benefit. This is tax-free when the member dies before they reach age 75. It is taxed upon the beneficiary (loved one receiving the pension-inheritance) as their own income if the member dies after 75 years.
Talk about inheritance & estate planning
While you’re in good health, have the conversation about death! It sounds stupid, but taking to someone who is poorly or at-risk is difficult. Having a conversation about death while you’re all healthy can be very positive.
If you have a SIPP or QROPS or other private pension, or company defined contribution plan, find out who is nominated in case you die. A simple form can be completed, where you choose loved ones and associated percentages to give them. If you can’t choose, you can leave your funds to charity. Without a nomination form, the pension trustees (who you’ve never met) will decide for you!