From MoneyWeek · · 2m
Why your pension won't follow your will
Pensions bypass your will entirely. Here's what you need to do instead to ensure your family gets the money.
In brief
Pensions bypass your will entirely. Here's what you need to do instead to ensure your family gets the money. You must fill out a separate beneficiary form with your pension provider, not mention it in your will, because pensions aren't treated as part of your estate. Originally reported by MoneyWeek.
Pensions don't follow your will
Most people assume their pension will pass to family through their will, but pensions are legally separate from your estate and your will has no power over them.
Use a beneficiary form instead
To pass on your pension, you must fill out an 'expression of wish' or 'nomination of beneficiary' form with your pension provider. Your will cannot override this.
Name one person or many
Your beneficiary can be a spouse, multiple children, grandchildren, or even a charity. The choice is yours on the form.
Defined contribution pensions
With a defined contribution pension, your beneficiaries can choose to take the remaining money as a lump sum or leave it invested to draw income from it.
Defined benefit pensions work differently
With a defined benefit pension, there's no pot of money left after you die. Your specific pension scheme decides what gets paid to your beneficiaries.
Update forms after life changes
A beneficiary form filled out 20 years ago may not reflect your current situation. Update it after marriage, divorce, having children, or entering a new relationship.
“It's important to keep these forms up to date, especially after major life events such as marriage, divorce, having children or entering a new relationship.”
Annuities have their own rules
If you bought an annuity with your pension, different types have different inheritance rules. A joint-life annuity continues paying your spouse, but a single-life annuity usually stops when you die.
Still mention it in your will
Even though your will can't control your pension, mention it anyway. Your pension provider will likely consider it alongside your beneficiary form.
Create a financial information document
Leave a document with details about your pension providers, will location, and funeral wishes so your executor and heirs can find everything easily after you die.
What to remember
You must fill out a separate beneficiary form with your pension provider, not mention it in your will, because pensions aren't treated as part of your estate.
