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If a recipient of a private pension does

(29 Posts)
hilbil21 Sat 30-Jan-16 21:21:16

Just had a thought occur to me about my late fathers private pension. He died in 2011 and after that it was paid to my mum. She passed away in November. Does the pension now stop altogether? Or if there is any of the "pot" left would it get paid to me? I am the sole beneficiary.

ProfGrammaticus Sat 30-Jan-16 21:23:16

It sounds as though he bought a joint lives annuity, in which case it will now stop. It would need to be in some kind of drawdown fund for anything to pass to you.

hilbil21 Sat 30-Jan-16 21:27:03

I know that when he died she was told it would be paid to her until her death. They died at 65 and 75 respectively. Surely if it now stops the company benefits as he has probably paid in more than has been paid out?

80sMum Sat 30-Jan-16 21:28:36

Unfortunately, that's how annuities work.

Artandco Sat 30-Jan-16 21:29:12

Yes, that's the problem with private pensions. You only really benefit if you live to be 85/90+ years. Otherwise your better off just having money in regular savings

hilbil21 Sat 30-Jan-16 21:29:58

Ah well. It's not something I had thought about before. Bit of a con really lol. hmm

Wuffleflump Sun 31-Jan-16 11:42:16

Well, unless you live to 95, that is. Which is increasingly common.

The reason pension funds are in such trouble is that people are living for longer. It certainly does work the other way too.

Viviennemary Sun 31-Jan-16 11:47:38

That's the case with all pensions. Except for dependants under a certain age such as children. Somebody was sayint the other day a lot of people won't even live to get a pension with all these new retirement ages. It's all a great big con really except if you live a long time.

hilbil21 Sun 31-Jan-16 15:30:48

Thanks all. Xx

P1nkP0ppy Sun 31-Jan-16 15:34:24

Once your private pension is set up on a 'platform' you can pass the pension pot on to whoever you want - mine's just been set up. It's tax free to the next recipient.

ProfGrammaticus Sun 31-Jan-16 15:52:49

It's tax free to the next recipient if you die before reaching the age of 75.

But that type of investment is different from an annuity, which it sounds as though the OP's parents had. And which was not necessarily a bad thing, as it guaranteed them income for life which a fund capable of being inherited doesn't do.

CalmYoBadSelf Sun 31-Jan-16 15:56:18

The people who lose out are partially balanced by the people who live long lives and get out more than they pay in. If people who died early got remainders passed to their families what would happen when somebody lived longer than average, would you have them left penniless? Or should they get paid more than they paid in and the pension companies go under?
This balance is what actuaries spend their lives calculating

TalkinPeace Sun 31-Jan-16 16:13:27

A family member of mine bought a £200,000 annuity.
She died of cancer before the first monthly payment was made.
£200,000 down the pan

I will never, ever buy an annuity at current rates
where you need to live 38 years just to get your money back, let alone profit form the "market returns"

mollie123 Sun 31-Jan-16 16:28:37

a lot depends on the stock market/investment choices
I have an annuity that pays a guaranteed annual amount and a top-up dependent on investment (50/50 split)
from a pension pot of 75K approximately 9 years ago I get roughly 5K a year (taxed of course) so that is 15 years worth - only another 6 to go smile
If there was a widows pension included in the personal pension it would probably have repaid most of the original pot anyway.
Of course if I don't last another 6 years - my remaining money is down the swanee !

Lindy2 Sun 31-Jan-16 16:37:52

TalkinPeace, that's very sad but your family member could have chosen options that offered some financial protection in the event of early death. Adding on guarantees that at least 5 or even 10 years of payments are made are very standard options that cost very little. She must have decided not to do that.

TalkinPeace Sun 31-Jan-16 16:42:25

mollie
So you bought just before the crash
well done
those returns will never return

15 years to get your money back is astounding as the current rate is around 40 years

Wuffleflump Sun 31-Jan-16 17:27:27

I'd rather bet on living a long life, comfortably. That is the aim, after all.

If I die early I think I've lost anyway! Irrecoverable money will not be a concern of mine any more.

TalkinPeace Sun 31-Jan-16 17:41:25

lindy
She had a DB pension , the annuity was a luxury that cost her kids £200k that they could have used productively after her death
as it was the sharks in red braces kept the lot

wuffle
I also aim to live
which is why I will not lock any of my money away for long periods of time without a guaranteed return
I recently (age 50) joined a DB scheme for the first time in my life - after 17 years I'll get a £1000 a year pension
DC schemes are even worse

specialsubject Sun 31-Jan-16 18:18:33

not a con - a gamble. If you knew the date of your death you could plan to run out of money exactly on that day.

you don't - so you buy an annuity. Some people live on for decades, some don't.

same as how our overall system should work; we all pay in for pensions, benefits, education and healthcare. We don't all use all of those. I won't feel conned if I don't get to spend ages in hospital.

specialsubject Sun 31-Jan-16 18:20:35

talkinpeace - if the terms of the defined benefit pension were such that your friend's children were entitled to the benefit after her death, why didn't that happen?

otherwise - very sad but that is the annuity gamble. She didn't pay out £200k - at least I hope not!!

mollie123 Sun 31-Jan-16 20:14:27

Defined benefit (DB) pensions are the best ones to have as they pay out much more than the worker ever paid in but there is no 'pot' as such to pass on except to pay a widows pension to the spouse.
my 'pre-crash' annuity was financed entirely by my own contributions to a personal pension so I had to weigh up the pros and cons before taking out an annuity. In retrospect I think I did the right thing but maybe not.

TalkinPeace Sun 31-Jan-16 22:04:59

special
Yup, she wrote the cheque ..... heartbreaking
The aim was to top up the widow's pension and protect capital from tax. It did not work.

Pensions are an utter nightmare and so fre people (including many people who work for schemes) do not understand the maths behind them.

mollie123 Mon 01-Feb-16 06:55:49

talkin - she should really have taken advice - yes money paid into a pension pot for an annuity does save tax but is not a wise thing to do as the money is tied up and not accessable except as a monthly payment.
I do find it worrying for the people concerned when I hear of large sums of money being paid into a pension fund so that they can claim tax credits on a reduced taxable income (although with the new pension freedoms |I assume they can draw it out again at 55). Keep control of as much of your money as you can yourself.

ProfGrammaticus Mon 01-Feb-16 09:03:45

Thankfully there are free face to face guidance meetings available now from CAB via their Pension Wise service for people trying to make these decisions - you don't have to start off by paying for independent financial advice. Though you may well need this after the free guidance if you have a pot of significant size, of course.

RhodaBull Mon 01-Feb-16 17:13:59

I simply don't understand pensions at all confused

I was under the impression that if you die your pension is kaput, except for the spouse getting 50% if you have that type of pension.

But then I read about people leaving their pension in their will - so how come? Does this apply to people on final salary pensions? How long would this go on for? It could be endless. Also, could my fil, aged 93, potentially marry a 25-year-old and pass on his pension to her?!

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