What happens to my pension when i die?

[WidoWanky]

I am only now about to start a work pension. not ideal at my age, 47, but i am mortgage free so thats a plus. So, my question is, if i pay into a work pension, and die before or shortly after retirements, what happens to my pension contributions? Does it all disappear and nothing left for my kids ? (Both on spectrum and a source of worry).

I will be joining the scheme as it would be daft not to benefit from employers 2pc (on my 3 day min wage 😂) but need to think about returns and how much to put where. Or keep throwing it in my ISA?

Please help!😊

You need to talk to the company providing the pension. Usually there is a form to complete to arrange to leave a small percentage of your pension to dependents. All pensions have T&C and you should have been given those prior to signing up.
Life insurance is very important, hopefully you sorted that as soon as you had children. If not, do look into it asap.

Normal terms are that if you die before you draw your pension, then it is treated as savings and passed to whoever you chose.
If you die having started receiving payments then you may lose it or a reduced amount go to a nominee.
But it depends on the terms of the agreement, whether you buy an annuity or do drawdown, all sorts.

You need to draw up a list of questions and then see a pension adviser.

Thankyou. I have not got the paperwork yet so will read their t&c.

I have 70k in isa and 40k due next year for mortgage endowment policy(now paid). It is the endowment payments i am going to put into a pension as i wont miss the money.

I suppose i am looking for the high return no risk golden egg!

Assuming that you have a standard defined contribution pension (that is, not a 'gold plated' final salary pension) you will get a choice of whether you want to swap your pot for an Annuity (that is, a monthly income paid for the rest of your life, or 'draw down' your pension. Draw down means you continue to have a pension pot that you can dip into to create your own 'income'.

An annuity will die with you (or carry on paying your spouse, if you've chosen that option).

A pot that you are drawing down can be inherited.

If you die before 75, whether or not you're retired, the pot can be inherited tax free, which can be really important.

I have a defined benefit pension, so if I die while still working the person I nominate receives quite a large lump sum and a continuing pension. It's a big perk of DB schemes.

As others have said, you need to get a copy of the Scheme booklet or find out if it's available online. Pension schemes all have different rules so there's no one-size-fits-all answer. The benefits will be different if you die before or after retirement too.

Until fairly recently, defined contribution funds left after taking the permitted lump sum had to be used to buy an annuity. Now there are more options available but it's really important you get advice on the options. Different approaches suit different people depending on their priorities.

When weighing up pension v. ISA don't forget you get tax relief on pension contributions. So if you're a basic rate tax payer and you want to put £10 into your pension, it will only cost you £8. Plus you'll get the employer's contribution too. Whereas with an ISA if you put £8 into it, you'll have £8 in an ISA - but then if your investment grows you won't pay tax on the growth in value.

As a PP has said, when it comes to retirement you now have a lot more choice on what you can do with the money you've built up in a pension fund (assuming it's a defined contribution pension scheme - not a defined benefit/final salary scheme, which it sounds like if you're saying your employer would put in 2%, i.e. they will put in a 'defined contribution'). You can buy an annuity (a guaranteed income for the rest of your life, but which won't pass on to anyone if you die); drawdown (i.e. leave the pension fund invested and just take out money as and when you need it - which can be passed on to your children if you die); or a combination of both. If you die before retirement, the whole pension fund you've built up would be passed to your nominated beneficiary.