One thing that you should start thinking when you are contributing to your pension is “what will happen to my pension saving when I die?” You have saved a lot for your pension all your working life and now it is time to retire from your work and enjoy those hard earned benefits. But what if something unusual happens, for instance what happens if you die? If you are unfortunate enough to die before taking pension you can still have some say where you’re hard earned money can go, that is by putting your pension savings death benefits into the trust.
When you start taking the pension, you usually have to nominate a name as a beneficiary of your death benefit. This means if you die before retiring, your pension savings will be passed on to the person you have nominated. The amount that is passed on normally comprises of the returns of the pension funds along with the life insurance tied to the pension. The pension savings are paid out tax free to whoever you want which is usually partner, spouses, or kids.
There are lots of pension savings schemes that benefit the following the individual’s death. This could be a pension paid to the defendant, a lump sum amount or a combination of both. The type of benefit paid normally depends on the person before or after starting the pension savings.
If You Die Before Starting Taking Your Pension Savings
Normally the schemes will be paid a lump sum. A defined benefits pension savings scheme will often pay a dependent’s pension and lump sum both. The company pension schemes that offer money purchase pensions will normally be paid lump sum and might not pay dependant’s pension.
If you have a personal pension scheme in a company where you no longer serve, these kinds of schemes may only pay you a refund of your pension contributions.
If You Die After You Start Taking Your Pension
The benefits might be paid as per the defined pension savings scheme rules. Here, the pension savings will depend on the choices that you have made before starting the pension savings schemes. This type of the schemes can guarantee you to pay a pension for up to ten years. If you die before the end of the guarantee time frame, the remaining payments will be paid to your nominated individual.
A defined pension savings benefit scheme will often pay the fraction for example half or two thirds of the pension you were receiving when you died.
Depending on the pension savings scheme you are provided with a lot of options to choose from. If you are unable to choose any death benefits your pension income will be lost and your spouse will be left without any income in case if you die early. Hence, it is the most important thing to do and choose the options carefully taking into consideration your future planning.
Different states clauses slightly vary when it comes to pension savings schemes. Hence, the entire thing also depends on which state you are residing and then you can seek a professional help in case of any query, taking help will guide you on how to get benefitted with your pension savings. This is your hard earned money and certainly you don’t want to it to drain away, so plan and enjoy your hard earned benefits.
Author bio: Jammy is a finance writer who writes for number of blogs and websites. He has recently written a article on his own blog where he put a light on why sometimes you just need to contest a will when you save for your pension plan. Check out his blog for more details on this topic.