A lot of people wonder what will happen to their pensions after they die and here at Burton & Fisher we can help you out with this. We started our series on this topic in our previous blog, looking at what would happen to your pension in the case that you die before taking any money out, or you are receiving your pension through income drawdown. This next part will cover what will happen if you are receiving an annuity income from your pension.
Annuities are one of the easiest ways to convert your pension fund into a regular retirement income, but if you want to pass on your pension fund onto a beneficiary after you die then you must choose your annuity type carefully. It should be noted that once you have chosen your annuity there is no way to change or cancel this so think carefully before you make your choice.
There are many options you can choose when buying an annuity income, but these below are the only ones you need to concern yourself with if you wish to pass this on after you die:
Joint Life Annuity – A joint life annuity is an option that allows you to pass on some of your annuity to your dependant (usually spouses or partners) after you die. You get to choose the amount of income they will receive and this is usually 50%, 66% or 100% of the income you were receiving.
Guaranteed Period - Choosing a guaranteed period for your annuity will mean that the income is guaranteed for a set number of years. Even if you die during this time, the income is still guaranteed and this is passed on to your beneficiaries for the remainder of the guaranteed time.
Annuity Protection Lump Sum – Choosing this option for your annuity will lead to a similar situation to a lump sum from income drawdown that we mentioned in the previous blog. After you die the funds used to purchase the annuity will be paid out as a lump sum to your beneficiaries, with a deduction of the funds you have already received. Just like the lump sum from income drawdown, the lump sum will be subject to a 45% tax.
So that’s all the pension scenarios covered and you should now know exactly what will happen to your pension after you die.
If you still feel like you need some help along the way with making decisions and completing forms then don’t hesitate to contact us at Burton & Fisher. We are independent financial advisors in Lancaster who can help with a range of financial issues, from pensions to equity release and many more. For more information, don’t hesitate to contact us on 01524 416 872.