Can I leave my pension to loved ones?

As long as you have the right type of pension, you can leave a legacy to one or more of the people closest to you. Read on to find out what options are available.

The quick and easy guide to leaving your pension to loved ones

If you want to know about leaving your pension to a loved one when you die then this guide is for you. It explains the rules and restrictions, what the tax might be like as well as covering other things to consider.

Headline facts at a glance

If, like a lot of people, you want the peace of mind of knowing that you can leave money to someone important when you die, you need to choose the right pension option. Lots of schemes will pass on a lump sum or a guaranteed income. Although, if you buy an annuity you need to choose carefully because only certain types give you the option to pass on your guaranteed income to a loved one.

Do all pensions let you pass money on?

Most pensions let you choose someone to receive any remaining savings or a guaranteed income when you die. If you currently have an older type of scheme there might be limitations so you would probably need to transfer it to a modern pension sooner rather than later. The good news is this is usually simple and straightforward to do. You may have a pension that gives you a guaranteed income for life, and these usually pay a person of your choice some or all of that income when you die. The main exception is an annuity, which is a product that provides you a guaranteed income for the rest of your life, in exchange for your pension pot. As you no longer own your savings there is no pension to pass on. You can, though, buy a type of annuity that lets you pass on some or all of your income to someone close.

What are the tax rules?

In most cases the size of the tax bill really depends on how old you are when you die. Before you turn 75 your fund can be passed on and the recipient will usually pay no tax at all. If you die after your 75th birthday, the recipient might have to pay income tax on money they take out of the pension. The exception is if you have what’s called a scheme pension. If it pays an income to a recipient when you die, it will be treated as income and they may have to pay income tax on it.

Is there a limit on how much money can be passed on?

You can usually pass on all the money in your pension if you want to. In some cases, there may be limits on how much annuities or company pensions will give to a recipient, though. If you aren’t sure, your employer of the company you bought your annuity from should be able to tell you if there are any limits. 

With so many options now available, if leaving money to one or more people is important to you it’s best to talk to a regulated financial adviser before making a decision. We have helped thousands of people get the most out of their pension, and the best part is it won’t cost you a penny to find out what we think is right for you.

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More information…

There’s a lot to think about with your pension, especially if you would like to leave some money to others when you die. This guide has explored some of the main considerations and below are answers to common questions people ask. If there’s anything else you’d like to know at the end, we are only a phone call away.

I’ve already bought an annuity, what are my options?

Annuities are irreversible, so if you already have one there isn’t currently anything you can do to get out of it. Some will pay a recipient part or all of your guaranteed income when you die, although this needs to be agreed when you first purchase the annuity. If you are unsure about the terms of your policy then the company you purchased it from should be able to talk this through with you.

Can I leave my pension to anyone?

In most cases it’s now possible to leave your pension to anyone you choose. That could be your children, grandchildren, best friend or your favourite neighbour. The choice is entirely yours. If you have a workplace scheme that promises you an income in retirement, you may have fewer options. If you’re unsure, your HR department should be able to tell you.

How do I inform my pension provider who I want the money to go to?

A simple phone call to your pension provider should be enough. They may require you to complete what’s called an ‘expression of wish’ form to confirm your chosen recipient, and that should be all there is to it.

Call 0800 304 7288 for a friendly chat about your pension

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Frequently asked questions

Important information

A quick reminder that the tax you pay depends very much on the current rules and your personal circumstances, and so could change in the future.

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