Falmouth Packet Business May ’18 – Pension death benefits

733,000 People at Risk of Passing on Their Pension to the Wrong Person

In an ever-changing working environment with the average person expected to have 11 different jobs during their working life and as many pension schemes, it is no wonder that this number is so high.

When joining a pension scheme, members are asked to fill out an “expression of wishes” form that outlines to the pension trustees who should receive any death benefits. The trustees and pension providers often consult these forms when deciding on how to distribute the pension death benefits, alongside any will that is in place.

According to research by Royal London, nearly three quarters of a million-people coming to retirement are at risk of passing their pension to the wrong person. The analysis of 773,000 people aged between 55 and 64 who are in at least their second relationship may be affected by this issue.

The problem stems from individuals informing the pension trustees that they wish to pass on their pension benefits to a first spouse but after a divorce they form a new relationship. Unless the records are amended there is a risk any benefits after death may go to an ex-partner.

How Much are your Death Benefits?

A further consideration should be the value of your death benefits. Some older schemes for instance may provide return of premiums only; whilst this is unusual, it does exist. When recently reviewing a new client’s pension arrangements, we established his scheme was valued at £87,300 but only provided death benefits of £19,001 which was a mere 21% of the true value.

There are many reasons to review your pension, not simply the performance, risk, charges but also death benefits. Under pension freedoms the options to pass on your pension wealth to the next generation is very powerful. Maybe it’s time to look at your own arrangements?


This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Sarah Williams of W.T Independent Financial Planning is an Appointed Representative of Vision Independent Financial Planning Ltd

Article May 2018