If the deceased was in receipt of a Personal Pension, this may not necessarily stop when they die, it’s possible a spouse or the estate may benefit but the State Pension paid to the deceased will cease. If the estate and pension is of a complex nature it is recommended to seek professional advice and details of companies who can provide this service can be found in the Legal & Financial section of the Funeral Services Directory. The following is intended as a general guide only.
information on Pensions & Other Benefits
Government State Pensions
Inform the Pension Service Helpline on 0345 606 0265 so that it can stop paying the pension.
If the deceased was your spouse or civil partner and you are not entitled to a full State Pension in your own right it may be possible to use their National Insurance (NI) contributions to increase your State Pension. The Pension Service do have a criteria for eligibility and full details can be obtained via the Pension Service claim line on 0800 731 7898.
If you haven’t reached the age of entitlement for a State Pension you should be able to claim other support and further details can be found on the Bereavement Benefits page.
Additional State Pension
Your spouse or partner may also have been receiving an Additional State Pension or made contributions for one in the future.
If this is the case, you may be entitled to some of this income. You could get up to a maximum of 50% if they reached State Pension age on or after 6 October 2010. You may be entitled to more if they reached State Pension age before then.
You won’t be able to inherit any of their Additional State Pension if you remarry or form another civil partnership before you reach State Pension age.
Call the Pension Service claim line on 0800 731 7898 to claim.
Personal and Workplace Pension
If there are any personal or workplace pensions, try to find out whether they’re either:
- A defined contribution pension – where you build up a pot to pay you a retirement income based on contributions from you and/or your employer and investment returns. It includes workplace and personal pensions, as well as stakeholder pensions. It might be run through an insurance company or master trust provider, or through a bespoke scheme set up by your employer.
- A defined benefit pension – This pays a retirement income based on your final salary and how long you have worked for your employer. Also known as ‘final salary’ or ‘career average’ pension scheme. These are generally only available from public sector or older workplace pension schemes.
Defined contribution pensions
If the person died before age 75:
- The income they received from an annuity will stop unless they took out income protection. If they did, any funds or future income will be paid to their beneficiary tax-free.
- Any untouched pension pots and remaining funds they had in an income drawdown arrangement can pass tax-free to their nominated beneficiary.
- The money will continue to grow tax-free as long as it stays invested. Provided it’s taken within two years, the beneficiary can take it as a tax-free lump sum or as tax-free income. If the beneficiary takes it after two years, they pay tax on it.
- Any remaining money or investments purchased with cash taken out of the pension pot will count as part of the deceased person’s estate for Inheritance Tax purposes.
If the person died age 75 or over:
- The income they received from an annuity will stop unless they took out income protection.
- Their beneficiary will pay 45% tax on any lump sum payments made from untouched pension pots, income drawdown or their annuity between 6 April 2015 and 5 April 2016 or Income Tax at their highest tax rate if the money is taken as income. Any amounts taken out after this – lump sum or income – will be added to the beneficiary’s income and taxed at their highest tax rate.
Defined benefit pensions
If the person who died hadn’t yet retired:
- If the person was paying into or was a member of a defined benefit pension when they died, most schemes will pay out a lump sum that is a multiple (typically two or four times) of their salary. If the person who died was under age 75, this will be tax-free.
- This sort of pension scheme typically also pays a ‘survivor’s pension’ to a spouse, civil partner or dependent child of the person who died.
If the person who died was retired:
- If the person was already receiving an income from a defined benefit pension, their dependants will probably be entitled to an income too. Often the pension for a surviving partner is higher during the first few months of bereavement while they adjust to their new situation and then falls back to a lower level. Check what benefits are due with the pension scheme or provider.
If the total value of all the deceased person’s pension savings when they died exceeds the lifetime allowance (currently £1.25 million reducing to £1 million in April 2016) and these savings haven’t already been assessed against the allowance, the beneficiary will have to pay more tax.
Pensions you don’t know about
The Pensions Tracing Service provide a service to try to identify if there are any other pensions you don’t know about. This is a free service.
Pension Tracing Service on 0345 6002 537 / 0191 215 4491
The Pension Service 9
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The surviving spouse or civil partner may be entitled to additional State Benefits and it is possible to check entitlement using the GOV.UK Benefit Calculator.