If both my wife and I die (no kids), who gets my pension?

FrankRizzo

Hello,

I have a mixture of bothPension types - Defined Benefit and Defined Contribution.

Sorry if stupid question - but if both my wife and I die (no kids), who gets my pension?

Surely the pensions provider doesn't just keep all my hard earned contributions?

Any help appreciated.

MallyGirl

DC - you fill in an expression of wishes - a charity, a friend, more distant family.

DullGreyGuy

FrankRizzo said:

I have a mixture of bothPension types - Defined Benefit and Defined Contribution.

Sorry if stupid question - but if both my wife and I die (no kids), who gets my pension?

Surely the pensions provider doesn't just keep all my hard earned contributions?

Any help appreciated.

DB - depends on the scheme rules, potentially the other members of the scheme... its ultimately how pensions/annuities work that some live longer than average and take out a lot more and others die young and their early death funds the payments for those living longer

DC - whoever you nominate assuming its pre-vesting, if its post vesting depends on the product and its rules. 

af1963

The defined benefit pension will probably just stop unless there are scheme rules to guarantee a certain period of payments. You'll be helping to pay for the luckier people who live longer than average. Defined contrib funds can be passed on to people you nominate (although technically your preference is not binding on the scheme)

MoneySavingGerbil

It will differ for each pension. Most DB pensions include a 50% spousal pension. i.e. if you die your wife will get 50% of the pension and then when she dies the pension ceases.

A DC pension, as MallyGirl has already said, can be passed to whoever you like. If you die befoe the age of 75 then whoever it passes to can take it as a lump sum or as a regular pension, neither option will incur any tax. If you die after the age of 75 then they will pay tax on the income they receive from it.

dunstonh

Surely the pensions provider doesn't just keep all my hard earned contributions?

I once had someone use that phrase to me and it turned out they were in a non-contributory pension.

Albermarle

MoneySavingGerbil said:

It will differ for each pension. Most DB pensions include a 50% spousal pension. i.e. if you die your wife will get 50% of the pension and then when she dies the pension ceases.

A DC pension, as MallyGirl has already said, can be passed to whoever you like. If you die befoe the age of 75 then whoever it passes to can take it as a lump sum or as a regular pension, neither option will incur any tax. If you die after the age of 75 then they will pay tax on the income they receive from it.

I suppose the issue is if if you nominate your spouse as beneficiary of the DC pot, and then you both die in a car crash. If there are no dependents/children, I suppose the trustees will have to work out what to do for the best.

Silvertabby

Guarantee periods and death grants apart, that is the way of DB pensions in particular.   ie, the contributions of those who die early help to pay the pensions of those who live to 100.  Otherwise, these schemes would be even more unaffordable.

Pat38493

Albermarle said:

MoneySavingGerbil said:

It will differ for each pension. Most DB pensions include a 50% spousal pension. i.e. if you die your wife will get 50% of the pension and then when she dies the pension ceases.

A DC pension, as MallyGirl has already said, can be passed to whoever you like. If you die befoe the age of 75 then whoever it passes to can take it as a lump sum or as a regular pension, neither option will incur any tax. If you die after the age of 75 then they will pay tax on the income they receive from it.

I suppose the issue is if if you nominate your spouse as beneficiary of the DC pot, and then you both die in a car crash. If there are no dependents/children, I suppose the trustees will have to work out what to do for the best.

Probably they will try to locate any living family member no matter how distant, and even if they never met each other or knew each other existed.

DullGreyGuy

MoneySavingGerbil said:

A DC pension, as MallyGirl has already said, can be passed to whoever you like. If you die befoe the age of 75 then whoever it passes to can take it as a lump sum or as a regular pension, neither option will incur any tax. If you die after the age of 75 then they will pay tax on the income they receive from it.

DC will depend on if it's vested or not... we see more people on here talking about buying an Annuity with the improved rates in recent years. If they've bought a lifetime annuity it then acts very similarly to a db pension for the same cross funding reasons. 

Silvertabby

Pat38493 said:

Albermarle said:

MoneySavingGerbil said:

It will differ for each pension. Most DB pensions include a 50% spousal pension. i.e. if you die your wife will get 50% of the pension and then when she dies the pension ceases.

A DC pension, as MallyGirl has already said, can be passed to whoever you like. If you die befoe the age of 75 then whoever it passes to can take it as a lump sum or as a regular pension, neither option will incur any tax. If you die after the age of 75 then they will pay tax on the income they receive from it.

I suppose the issue is if if you nominate your spouse as beneficiary of the DC pot, and then you both die in a car crash. If there are no dependents/children, I suppose the trustees will have to work out what to do for the best.

Probably they will try to locate any living family member no matter how distant, and even if they never met each other or knew each other existed.

Pension schemes won't do that.  Far too expensive!  In cases where there is no clear beneficiary - or when there are multiple cousins 4 times removed all screaming 'me, me me!' then the trustees will probably apply the rule of last resort and pay any money due to the executor.