Top tip
You can speed things up and be tax-efficient by simply completing a nomination form. This clearly states who you’d like to receive your pension savings and how much they should get.
What happens to my pension if I die before I retire?
One of the major concerns people have about their pensions is a very important one. What happens if you die without accessing your money? That depends on how old you are and it’s actually quite clear cut.
Before 75
As long as your pension provider makes a payment to your nominated beneficiary within 2 years of notification of your death, no income tax will be liable on your pension savings.
You may need some inheritance tax (IHT) planning as most pension schemes are held in trust. By setting up a trust, it keeps your pension separate from your estate. This limits HMRC's claim on your retirement savings.
After 75
Any money paid to your beneficiary will be subject to income tax. Your pension provider will deduct an emergency tax on HMRC’s behalf. To give you an idea, it could be 40-45% which will be automatically deducted from a lump sum payment.
Tax Warning
Tax treatment will depend on your individual circumstances and may be subject to change in the future.
It pays to plan
Planning for the life of your pension after you die can save a lot of heartbreak and money. Selecting an FCA-approved independent financial adviser via unbiased.co.uk may enable you to structure your plans in a tax-efficient way.
I'd prefer my family to benefit, not HMRC.
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