Pensions and your wills connected
There is a correlaton to ensure your will and pension is connected to avoid uncertainty and missing out. Contact us today P to find out more.
Pensions and Wills Connected - Trusted Pensions P
When you die, your pension will not automatically sort itself out.
A properly written will ensure that your assets and pension will end up where you want them. Your pension provider will ask you to complete a nomination form or an expression of wishes, which allows you to tell them what you’d like to happen to your pension when you die.
Failure to complete this form could cause many problems for your dependents. Without your instructions, there may be delays in paying your pension to your beneficiaries.
The amount claimed depends on the type of pension, the beneficiaries and the age of the deceased. If you are taking care of a loved one’s affairs after his death, you should check his paperwork to see if he had workplace or personal pension plans.
If he did, you should contact his pension provider to determine how much he had and what must be done next. If you’re taking care of your loved one’s pension, you have to know whether it’s a defined benefit pension or a defined contribution pension.
What are Defined Benefit Pensions?
The amount that you will receive depends on whether your loved one was retired or not. If he was retired, a reduced pension would continue to be paid to a civil partner, spouse or another beneficiary until they die. Contact the pension provider to determine what benefits are due.
If your loved one had yet retired, you might receive a lump sum that is usually 2 or 4 times his salary. The lump sum is tax-free if the deceased was under age 75. A taxable survivor’s pension is also paid to the deceased’s dependent child, spouse or civil partner.
What are Defined Contribution Pensions?
If your loved one died before age 75, the income that he received from a single life annuity would stop unless there was a guaranteed period stated in the annuity. If there was a guaranteed period, the beneficiary would continue to receive a tax-free income until the conclusion of the guarantee period.
If the deceased had a joint life annuity, the beneficiary would continue to get a tax-free income until his death. However, the income given is typically at a reduced rate. It is best to ask the annuity provider about their rules regarding this matter.
If your loved one had a flexi-access drawdown pension that was first accessed or set up after April 5, 2015, any amount paid within 2 years of the deceased’s death would be tax-free. If the pension is claimed more than 2 years after the deceased’s passing, the amount paid will incur tax.
Any amount is taken out of the pension plan before death will be considered as part of the deceased’s assets and might also incur inheritance tax.The money will continue to grow tax-free provided that it stays invested.
If the pension hold died age 75 or over, the income he had received from a single life annuity will stop unless a guaranteed period was included in the annuity. If there was a guarantee period, the beneficiary would receive the income until the end of this period. The payments will incur income tax. If the deceased had a joint annuity, his beneficiary would continue to receive an income.
The payments will also incur income tax. Any money taken as an income or lump sum from a whole pension pot or from a flexi-access drawdown plan will be added to the survivor’s income and taxed like normal.
If you need advice regarding your pensions and wills, we are here to help. We will explain what options are available to you and which one is right for your needs and situation. Call us today!