What happens to my UK pension when I die?

A concern for many people is how their beneficiaries will manage financially when they die. The pension benefits your beneficiaries may receive can differ considerably depending upon the type of UK pension(s) you have and whether you have already started to take pension income.

If you have a UK defined benefit pension it is important to review the scheme rules to understand what death benefits are provided. Typically, your spouse will be entitled to a percentage of your annual pension per annum (indexed link). This is often 50% of your pension. A death benefit lump sum may also be payable. A percentage of your pension may also be payable to children under the age of 18 (or 23 if in full time education), however, this is not always the case.

For defined contribution pensions, if you haven’t drawn any pension income yet, your beneficiaries should have several options including taking a lump sum, purchasing an annuity or potentially drawing the pension flexibly under flexi-access drawdown. However, not all UK pension plans offer all options. In some cases, it can make sense for a beneficiary to transfer to another UK pension provider for more pension benefit options.

If you have already started to take pension income through flexi-access drawdown, your beneficiaries can take the remaining funds as a lump sum, purchase an annuity or continue with flexi-access drawdown. However, if you already purchased an annuity, what is payable will depend upon the type of annuity that you purchased (for example single or joint life).

At Florin Pensions we help our clients’ beneficiaries understand what pension benefits they are entitled to and determine the right options for them to access them.