Will your ex inherit your Pension if you die? A Guest Post From Servo Private Wealth

Will your ex inherit your Pension if you die?  Servo Private Wealth

Many people approaching retirement may still have unwittingly named an ex-spouse or ex-partner as their pension beneficiary upon their death.

Pensions don’t automatically ‘sort themselves out’ when someone divorces or 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.  

According to a recent Royal London study, out-of-date paperwork may put current partners at risk of missing out.  Over three-quarters of a million people near retirement are at risk of passing their pension pot on to the wrong person when they die, recent research by insurer Royal London has found. Those who have specified partner as their pension beneficiary, only to divorce or separate but fail to update their wishes, are unaware that their remaining benefits may still pass to this ex-partner when they die.  

The Royal London study looked at those aged between 55 and 64 who had remarried by the age of 50, who also had pension savings. It found that around 773,000 people were in this position, and therefore at risk of their pension being inherited by their former spouse or partner.  

Pension benefits technically fall outside a person’s estate, so are not covered by a will. Savers who want to name a beneficiary of their pension pot must therefore complete an ‘expression of wish’ or  ‘nomination of beneficiaries’form when enrolling on a workplace pension or private pension scheme. If someone nominates their spouse, but then divorces and forgets to update this paperwork, the scheme’s trustees may be obliged to respect the original wishes.  

This is a real hidden hazard for many pension savers, who may have joined their pension scheme decades ago and forgotten all about nominating a beneficiary. Further problems can arise when people switch jobs and move to new pension schemes, as then it’s easy to lose track of old pension pots. It’s relatively easy to trace old pension pots with the help of the Pension Tracing Service, but equally important to update the nominated beneficiary on each scheme.  

Grounds for pension disputes  

The nomination of beneficiaries (there can be more than one) on a pension scheme is not legally binding in the way that a will is but is just an instruction to the scheme and its trustees. It may therefore be possible to contest this nomination if there is reason to believe it was out of date. However, this would at the very least be a stressful process, and probably lengthy and costly too. An ex-spouse named as the beneficiary of valuable pension benefits would have a strong claim on them and may not want to give them up without a fight.  

Helen Morrissey of Royal London said, ‘Over the course of our lives, many of us will be in a number of different relationships. The person we want to receive any pension benefits after we are gone is likely to change over time. But if we have not told all of our past pension schemes about our new wishes and our new  circumstances, there is a risk that the wrong person will stand to gain.’  

Given that the Royal London study only looked at those approaching retirement age (those aged between 55 and 64), there are potentially many more people in the UK with pension savings that are nominated to pass to an ex-partner. 

Don’t give your ex a pension windfall – follow these 6 tips  

1. Keep records of your pensions and providers and make sure your family can find them.

2. Contact each provider to check who your ‘nominated beneficiary’ is and specify one(or more)if you haven’t done so already. 

3. Keep a copy of each form you send back to pension providers. 

4. Review your nominated beneficiary if your relationship circumstances change.

5. Keep your will up to date. Although pensions aren’t covered by your will, expressing clear wishes here may be useful in settling any disputes after your death. 

6. Lastly: if you have a final salary (defined benefit)pension, different rules around inheriting benefits will apply, so check with your pension provider. 

If you would like to find out more about any aspect of pensions, saving for retirement, or your finances due to a  divorce, then please get in touch for a free initial no-obligation discussion to see if we can assist in any way. info@servoprivatewealth.com. 01444 715200. www.servoprivatewealth.com 


Important information: The views and opinions contained herein are those of the authors of this page and may not necessarily represent views expressed or reflected in other Servo Private Wealth communications. The content of this article is for information only. It does not represent personal advice or a personal recommendation and should not be interpreted as such. Please do not act upon any part of it without first having consulted an Independent Financial Adviser.  

The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.  The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Information herein is believed to be reliable but Servo Private Wealth does not warrant its completeness or accuracy. Reliances should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Servo Private Wealth has to its customers under any regulatory system.  

Issued by Servo Private Wealth Limited, Basepoint Business Centre, John de Mierre House, Bridge  Road, Haywards Heath, West Sussex, RH17 5HJ, 01444 715200. Servo Private Wealth is an appointed representative of best practice IFAGroup Limited which is authorised and regulated by the Financial Conduct  Authority.  

Will your ex inherit your Pension if you die?

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