Did you know that, according to research conducted by Royal London, over 750,000 people may be at risk of passing on their pension to the wrong person?
When planning for retirement, it’s essential to ensure that you plan ahead to ensure the right person will inherit your pension pot after you pass away, if this is required. What are some of the rules involved?
Can I leave my pension to another person?
Yes, many pension schemes give you the ability to leave your pension to another individual. This could be via a lump sum or a drawdown pension, if you are paying into a defined contribution scheme. However, if you are paying into a defined benefit pension, this may not be the case, as they usually only allow you to leave your pension to a dependant.
Can I choose who inherits my pension pot?
When planning for your retirement, it’s important to take into account the rules regarding where it will go after you pass away. For example, you will need to know who may potentially inherit your pension pot.
Many pension schemes give you the ability to nominate the person who will inherit your pension pot. This is done in an “expression of will”, meaning your pension provider will use this to direct your pension to the person you nominated. This means that it’s important to keep official documents regarding who will inherit your pension and estate up to date, especially if you have remarried.
What about tax?
After you pass away, inheritance tax isn’t usually charged on pensions, unless you have previously taken a lump sum from your pension. This means that if it is a part of your savings, it will be taxed as part of your estate.
However, beneficiaries of your pension may have to pay income tax, depending on how old you are when you pass away. As well as this, if your pension pays out a lump sum to the beneficiaries of your pension after you pass away, they may have to pay more tax as a result of falling within a higher tax bracket.
If you’re looking for help investing for retirement and retirement financial planning advice, contact our local financial adviser team today. Please call on 01926 492406 or email us at firstname.lastname@example.org to make an appointment.