21 Nov 2018 Posted in Inheritance Tax Wills & Estate Planning 

What happens to my pension when I die?

Rebecca Broom Posted by Rebecca Broom, Associate Solicitor - Wills, Trusts & Probate

What happens to my pension when I die?

A pension pot is often one of the largest assets on death so it’s important to consider when planning your estate or drawing up a Will.

New pension rules apply for private pension funds on death but pensions which are final salary or defined benefit schemes ae no included in the changes.

The type of pension you have and whether or not you have started drawing from it will determine if it will be liable for inheritance tax. If you have taken your tax-free lump sum but not used it before you die, it becomes part of your estate and potentially liable for inheritance tax. If you haven’t drawn down from your pension it is possible that you can leave it to someone after you die.

Here is a general guide but you need to check with your specific advisor about your personal circumstances:

 

Die before 75

Die on or after 75

No money withdrawn from Pension

Tax free

Tax free

Pension in drawdown or passed on after 25% taken

Tax free

Tax free

Funds removed from pension

Tax free

Marginal rate of income tax

To protect your pension from being added to your estate and therefore wiping out the available tax benefits, you should nominate your pension or leave instructions so that your pension pot is not added to your estate. When you join a pension scheme you will be asked to complete an ‘expression of wish’ or ‘nomination of benefits’ form where you can indicate who should inherit the benefits when you die. It’s important to ensure these wishes are kept up to date.

Pension schemes can be complicated but our specialist team of estate planning solicitors are on hand to offer advice based on your individual circumstances. To find out more please call 01225 485700 or email hello@mowbraywoodwards.co.uk 

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Rebecca Broom

Rebecca Broom

Associate Solicitor - Wills, Trusts & Probate

01225 485723

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