What Happens to Your Private Pension When You Die?

A private pension is an important financial asset, and understanding what happens to it after death ensures your loved ones are taken care of. Whether your pension is inherited, taxed, or lost depends on factors such as the type of pension, your age at death, and who you’ve nominated as a beneficiary.

Who Inherits Your Private Pension?

The fate of your private pension depends on whether you have:

1. A Defined Contribution Pension (Personal/Workplace Pension)

   • If you die before age 75: Your beneficiaries can inherit your pension tax-free.
   • If you die after age 75: Your beneficiaries may have to pay income tax on withdrawals at their tax rate.
   • You can nominate a spouse, family member, or other beneficiary to receive the funds.

2. A Defined Benefit Pension (Final Salary Pension)

   • Usually provides a reduced pension to a surviving spouse or dependent.
   • Some schemes offer a lump sum payout, while others may not allow inheritance.

3. Annuities

   • If you purchased a joint-life annuity, payments will continue to your spouse.
   • If you have a single annuity, payments typically stop unless you have a guarantee period.

How to Ensure Your Pension Is Passed On

✅ Nominate Beneficiaries – Ensure your pension provider has up-to-date beneficiary details.
✅ Check Pension Scheme Rules – Different providers have different inheritance rules.
✅ Consider a Pension Drawdown – A flexible pension drawdown allows beneficiaries to inherit the remaining funds.
✅ Speak to a Financial Advisor – Maximise tax efficiency and plan for inheritance.

Are Private Pensions Subject to Inheritance Tax?

• Defined Contribution Pensions are not usually subject to inheritance tax (IHT).
• If the pension is paid into your estate, it may become taxable under IHT rules.
• Defined Benefit Pensions may have different tax rules, depending on the provider.

How Fraser Bond Can Help

At Fraser Bond, we assist clients with estate planning, pension inheritance advice, and tax-efficient strategies to protect their wealth. Contact us today to ensure your private pension is passed on efficiently and tax-effectively.