A pension is a long-term investment. Its value can go down as well as up and could be worth less than was paid in. Laws and tax rules may change in the future. Your own circumstances and where you live in the UK will also have an impact on tax treatment.
What happens to your pension plan when you die?
While it’s not a nice thing to think about, there are some things to be aware of for when the worst happens. Most people save money for years to fund their retirement, so it can give you peace of mind to know where your money could go after you die.
Keep in mind that you can’t leave instructions for what you want to happen to your pension money in your will. That’s why it’s worth speaking with your pension provider about your options in advance.
What your pension provider could do
Pension providers will take into account the people or causes you want to leave your money to when you die. However, it’s ultimately up to the provider who receives your pension money. The people or causes receiving your money are commonly referred to as your ‘beneficiaries.’
Most modern pensions will offer your beneficiaries a range of options for accessing any money left. Not all pension schemes will though, so it's important to check with your provider if unsure.
You may have the option to transfer your pension plan to another provider if your current pension plan doesn’t offer the death benefits or flexibility you’d like. Transferring isn’t for everyone and you should seek financial advice before starting a transfer if you’re unsure.
You can learn more about how Standard Life pension transfers work and what to think about here:
How to name a beneficiary
The process will be different depending on your provider. With a Standard Life personal pension, you can name and update your beneficiaries online by logging in.
Here's a breakdown of how the process typically works:
- You can name one or more individuals or causes that you would like to leave your pension money to. They will be considered as potential beneficiaries after you die.
- It is possible that the money could be paid to your estate but if the pension scheme decides where payment of the death benefits is to be made, it will normally be outside of your estate for Inheritance Tax purposes.
- Any beneficiary who is an individual will usually have a choice of how they want to take your pension money.
- They will receive the money usually free of tax if you die before age 75. But if you die after age 75, they will have to pay tax at their highest income tax rate.
- When a beneficiary dies, they may be able to pass on anything that is left
We have a whole guide that looks at ways to pass on your money tax-efficiently. It covers things like inheritance tax, beneficiaries and more.
Death and workplace pensions
There are a few things to think about if you’re part of a workplace pension scheme. For example, some workplace pensions come with a type of life insurance, which could pay out a lump sum to your loved ones if you die while still employed. You should check with your employer what death in service benefits they provide.
Some workplace pension schemes even pay a guaranteed income for life (an annuity) to your partner and loved ones when you die. The full range of death benefits you could get depends on the provider. MoneyHelper has more information on death and workplace pensions if you want to know more.
If someone you know dies
Should the worst happen to a member of your family, speak to their pension providers directly. They should be able to tell you what options you have and what to do next. You can also contact their employer if you need to find out about their workplace pensions.
You can contact Standard Life directly if you need to speak with us about a family member who has passed away.
More about pensions
We have many guides and tools to help you get the most out of your pension savings.