Your Will May Not Decide Who Receives Your Pension
Why reviewing your pension nominations should be part of your estate planning.
Making a Will is one of the most important steps you can take to ensure your wishes are followed, and your assets pass to the people you care about most.
However, there is one valuable asset that is often overlooked when planning for the future: your pension.
Many people assume that if their Will states who should inherit their money and possessions, the same people will automatically receive any remaining pension benefits when they die. Unfortunately, that’s not always the case.
Your pension may sit outside your Will
For many pension schemes, any death benefits are paid at the discretion of the pension provider or scheme trustees. This means your pension may not be distributed according to the terms of your Will.
Instead, pension providers will usually ask you to complete an Expression of Wish or Nomination of Beneficiary form. This tells them who you would like to receive the pension benefits after your death.
While providers and trustees will usually take your wishes into account, they often retain the final discretion when deciding who receives those benefits.
A simple example
Imagine John joined a workplace pension scheme in his twenties and named his then-partner as his beneficiary.
Years later, John marries someone else, has children and updates his Will so that everything passes to his wife and family. However, he never updates his pension nomination form.
When John dies, his family may be surprised to discover that the pension provider is looking at the old nomination, which still names his former partner.
The provider will consider the circumstances and scheme rules, but the outdated nomination could create confusion, delays and uncertainty at an already difficult time.
This is why making a Will and reviewing your pension arrangements should always go hand in hand.
When did you last check your pension nomination?
Many people complete a pension nomination form when they first join a workplace pension and never think about it again.
Yet life’s circumstances can change significantly over the years.
You may have:
- Married or divorced
- Started a new relationship
- Had children or grandchildren
- Lost someone previously named as a beneficiary
- Changed your mind about who you would like to benefit
Your Will may have been updated to reflect these changes, while your pension nomination remains exactly as it was years ago.
For that reason, pension nominations should be reviewed regularly, particularly after major life events such as marriage, divorce, the birth of a child, or retirement.
It is also worth remembering that many people have several pensions from different employers, each with its own nomination form and records.
What should you do?
As part of your estate planning review, it is sensible to:
- Make a list of all your pension arrangements, including pensions from previous employers.
- Contact each provider and check who is currently named on your Expression of Wish or nomination form.
- Confirm that the nomination still reflects your wishes.
- Update it if necessary.
- Keep details of your pension providers with your important documents so your executors and family know where your pensions are held.
- Review your Will at the same time to ensure your wider estate planning remains appropriate.
Importantly, the position can vary depending on the type of pension and the rules of the individual scheme. You should always check with your pension provider if you are unsure how your pension benefits will be dealt with.
Pension and Inheritance Tax rules are also changing
There is another reason why pensions deserve attention as part of your estate planning.
Under the current rules, most unused pension funds and death benefits under discretionary pension arrangements generally fall outside a person’s estate for Inheritance Tax purposes.
However, this position is due to change from 6 April 2027.
For deaths occurring on or after that date, most unused pension funds and pension death benefits will be included when calculating the value of an estate for Inheritance Tax purposes.
This means pension benefits may need to be considered alongside other assets, such as your home, savings and investments, when assessing the overall tax position.
There are exceptions, including certain death-in-service benefits and some dependants’ pensions, and the rules can be complex. Taking advice and reviewing your arrangements early can help ensure there are no surprises for your loved ones.
Estate planning is more than making a Will
A professionally prepared and regularly reviewed Will remains at the heart of good estate planning, but it is only one piece of the puzzle.
Pensions, jointly owned property, life insurance policies, trusts and other arrangements can all affect what happens to your assets when you die.
At Garner & Hancock Solicitors, our Life Planning team can help you review both your Will and your wider estate planning arrangements to ensure they continue to reflect your personal circumstances and wishes.
