At Wills Services, we understand that pensions might not be on your mind until retirement approaches. However, planning for the unexpected is crucial. If you were to pass away before enjoying the benefits of your pension contributions, it’s important to know that your pension pot doesn’t simply disappear or automatically transfer to your next of kin. Instead, certain steps must be taken to ensure your pension goes to the right person.
Who inherits your pension?
If you die before accessing your private or company pension, your pension provider or the nominated trustees decide what to do with your pension savings. It’s a common misconception that your pension can be bequeathed through a Will, but this isn’t the case. As Money Saving Expert founder Martin Lewis explained on This Morning, you need to nominate a trustee and complete an Expression of Wish Nomination Form to specify who should benefit from your pension.
What is an Expression of Wish Nomination Form?
An Expression of Wish Nomination Form is a document that lets your pension provider know who should receive your pension savings (the "beneficiaries") if you die before retirement. While it’s not legally binding, this form provides a strong indication of your wishes and guides the trustees in their decision-making process.
As Martin Lewis highlighted, filling out this form is crucial to avoid your pension unintentionally going to someone like an ex-partner. It’s easy to complete, and templates are usually available online through your pension provider.
How to complete an Expression of Wish Nomination Form
Each pension provider has its own version of the Expression of Wish Nomination Form, which you’ll usually be asked to fill out when you join a pension scheme. Though not mandatory, it’s highly recommended.
Here’s what you’ll typically need to provide:
- Your details: Name, National Insurance number, and pension account number.
- Beneficiary details: Name, address, date of birth, and relationship to you. You can nominate one or multiple beneficiaries.
- Percentage allocation: Indicate the percentage of your pension savings you want each beneficiary to receive. The total percentage must equal 100%.
Who can you nominate as a beneficiary?
The type of pension you have Will determine who you can nominate:
- Defined-contribution (money-purchase) pensions: You can nominate anyone, such as a partner, relative, friend, or even a charity.
- Defined-benefit (final salary) pensions: Your options are more restricted, and you can only nominate people according to the scheme’s rules. Check with your pension provider for specific details.
Important Note: If you nominate someone under 18, the pension provider Will typically only pay out to them if a trust or other suitable arrangement has been set up.
Employer contributions to your pension
Under the auto-enrolment scheme, employers are required to contribute to their employees' pensions. From April 6, 2019, the minimum employer contribution is 3%, with total contributions (including employee contributions) needing to reach at least 8% of qualifying earnings.
Qualifying earnings are any pre-tax employment income between £6,240 and £50,270 (for the 2024/25 tax year). For example, if you earn £25,000, the combined employer and employee contribution would be £1,501 annually.
Planning for your pension
The basic advice, according to the Money Saving Expert site, is to contribute as much as possible, as early as possible, to ensure a comfortable retirement. Additionally, ensure your Expression of Wish Nomination Form is up to date, especially if your personal circumstances change, to prevent your pension from going to someone you no longer wish to benefit.
Next steps
To protect your loved ones and ensure your pension goes to the right person, make sure to:
- Fill out or update your Expression of Wish Nomination Form: Contact your pension provider to obtain the form or update an existing one.
- Review your beneficiaries: Regularly review and update your nominated beneficiaries, especially after significant life events like marriage, divorce, or the birth of a child.
- Consult with a trustee or financial advisor: If you're unsure about your nominations or the rules governing your pension, seek professional advice.
