What to do about someone’s pension when they’ve died

Money Advice Service

Pensions don’t automatically ‘sort themselves out’ when someone dies. It’s possible that a spouse or another beneficiary might benefit. But the amount claimed depends on the type of pension, the age of the deceased and their beneficiaries.

What to do about their State Pension

If the person who died was getting a State Pension, you should tell the Pension Service that he or she has died so that payments stop.

Call the Pension Service helpline on 0345 606 0265 (call charges apply).

Claiming their State Pension

You might be entitled to extra pension payments from your spouse’s or civil partner’s State Pension.

It depends on the amount of National Insurance (NI) contributions they made and when you and your spouse or civil partner reach(ed) the State Pension age.

If you haven’t reached State Pension age, you might also be eligible to claim Bereavement benefits.

Contact the Pension Service on 0800 731 0469 (free to phone) to find out whether you are eligible to claim.

You can also get more information about this on the GOV.UK website.

What to do about their personal and workplace pensions

If you’re dealing with someone’s affairs after their death, you should check their paperwork to see if they had any personal or workplace pension schemes.

If they did, contact the pension provider to find out how much they had and what to do next.

If you don’t know who the pension provider is and the deceased was employed, contact their employer to see if there was a current workplace pension.

The amount you can claim and when you can claim it depends on which type of personal or workplace pension it is.

You’ll also need to find out if any personal or workplace pensions are:

Once you know this information, you need to contact the pension provider, or employer if it’s a workplace scheme.

You need to find out how much the deceased had, and how to claim that pension.

You can use this letter template (DOC 28KB) to contact the pension provider.

If you can’t find any trace of a personal or workplace pension, but you think the deceased person might have had one, contact the Pensions Tracing Service or on 0345 600 2537 (call charges apply).

Defined contribution pensions

Different tax rules apply to the rules when inheriting a defined contribution pension.

It depends on whether the individual died before or after 75.

If the person died before age 75:

  • if they received income from a single life annuity, this will stop unless there was a ‘guaranteed period’ attached to the annuity.
    In which case, it will continue to be paid tax-free until the end of the guarantee period (usually 5 or 10 years).
  • if it was a joint life annuity, income will continue to be paid to the survivor (also tax-free) until their death. But this is usually at a reduced rate (half is common).
    If you are not sure which they had, ask the annuity provider.
  • if the deceased had a flexi access drawdown pension which was set up or first accessed after 5 April 2015, any money paid within two years of the pension holder’s death will be paid tax-free.
  • however, if the pension is claimed more than two years after the pension holder’s death, tax might be payable.
  • any money taken out of the pension scheme before death (or any investments bought with cash from the pension scheme), will count as part of the deceased’s estate and might be subject to Inheritance Tax.
  • the money in the pension will continue to grow tax-free as long as it stays invested.

If the person died age 75 or over:

  • if they received income from a single life annuity, this will stop unless there was a ‘guaranteed period’.
    In which case, it will be paid to the beneficiaries until the end of the guaranteed period. Income tax will apply to the payments.
  • if it was a joint annuity, income will continued to be paid to the survivor, and income tax will apply.
  • any money taken as a lump sum or as an income from a flexi-access drawdown scheme or from any untouched pension pot, will be added to the beneficiary’s’ other income and taxed in the normal way.

Defined benefit pensions

How a defined benefit pension pays out depends on whether the deceased was retired or not.

If the deceased hadn’t yet retired:

  • most schemes will pay out a lump sum that is typically two or four times their salary.
  • if the person who died was under age 75, this lump sum is tax-free.
  • this type of pension usually also pays a taxable ‘survivor’s pension’ to the deceased’s spouse, civil partner or dependent child.

If the deceased was retired:

  • if the deceased was in receipt of a pension from a defined benefit scheme, a reduced pension will often continue to be paid to a spouse, civil partner or other dependent until they die.
  • check what benefits are due with the pension scheme or provider.

Lifetime allowance

If the total value of all the deceased’s pension savings is more than the lifetime allowance, you might have to pay more tax on any pension savings you inherit.

The allowance limit is currently £1,030,000 for the 2018-19 tax year.

More help with sorting out a pension

If you need more information about sorting out the pension of someone who’s died, or how you should claim their pension, contact the Pension Advisory Service.

This article is provided by the Money Advice Service.

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Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

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