What happens to your company pension when you die :Cross Stitch – Pensions and retirement planning
There are different kinds of company (occupational) pensions and the scheme rules vary from company to company. Find out what typically happens to a company pension when you die and how to get help and advice if you need it.
There are two main types of company pension scheme:
Salary-related (or ‘defined benefit’) scheme
The amount you get is based on your salary and the number of years you have been in the scheme.
Money purchase (or ‘defined contribution’) scheme
The amount you get is based on how much you and your employer have contributed to your fund and how the money has been invested. At retirement, the money you have built up in your fund is used to provide your pension. Usually it is used to buy an annuity (a regular income payable for life from an insurance company).
Most pensions have a guarantee period of five (or less commonly, ten) years. If you die within that time, the balance of the guarantee period is paid. It is sometimes paid as a lump sum to the person you nominate or to your estate.
There may also be a pension payable to your husband, wife or civil partner, usually for the rest of their life. Some schemes provide pensions for partners who are not married or in a civil partnership. Not all schemes do though, so it is important to check what your scheme provides.
Salary-related schemes
The rules of your scheme will tell you whether there is a pension for your partner and if so, how much. In most schemes, it is around half, but it can be as much as two-thirds.
Money purchase schemes
If your fund is used to buy an annuity, you can usually choose the level of pension payable to your partner if you die. This can be up to two-thirds of the maximum pension the scheme could have provided for you.
If there is no guaranteed period, or if you die outside of that period, this will affect any pension payable to a surviving partner. Any decision will be based on options you would have been given when you retired. You would normally make the decision on whether to provide a survivor’s pension when you retire. You can find out what happens in your scheme by asking the scheme’s trustees or administrators.
When you join a company’s scheme, you will probably be asked to fill in an ‘expression of wish’ form. This states who you would like any lump sum benefits to be paid to.
The trustees of your scheme will usually make the final decision about who receives your lump sum benefits. They will usually follow what you have requested on your form, so it is important to amend it if your circumstances change.
You can get help and advice about your company pension from the following organisations:
Trustees
Your scheme’s trustees have a duty to look after your interests or, if you die, your dependants’ interests. The scheme’s trustees or administrator should be able to answer any questions you have.
Independent financial adviser (IFA)
For independent advice, you could talk to an IFA. You may have to pay a fee, so it is best to check beforehand.
The Pensions Ombudsman can investigate complaints about the running of pension schemes, or disputes about trustees’ decisions.