What happens to my pension when I die?
Dec 12, 2023
Discussing what happens to your pension after you pass away isn't a topic many of us rush to think about. However, understanding this could not only offer you peace of mind but also ensure your loved ones are taken care of financially.
Your Pension's Destiny
When you pass away, your pension pot can typically be passed on to your loved ones (called 'beneficiaries') without being subject to inheritance tax. This means that more of your hard-earned money can go directly to the people you care about most.
Choice for Beneficiaries
Those you nominate as beneficiaries have a choice in how they receive their share of your pension. They can either take it as a lump sum or decide to keep it invested in a pension scheme to potentially grow over time. Keeping the pension invested allows them to withdraw income as needed, continuing to benefit from the pension’s tax-efficient status.
Who Can You Nominate?
You have the freedom to nominate anyone to be your beneficiary – from your spouse or civil partner to children, grandchildren, or even someone unrelated. It’s important to consider who you think will benefit most from this.
Tax Implications
It's worth noting that your beneficiaries might need to pay income tax on the pension money they receive, depending on certain factors. Generally, if you die before the age of 75, no income tax will be charged on the pension funds received.
Making It Official
You can easily record your beneficiary in the Penny app. It’s quick, straightforward, and ensures that your wishes are clear.
