Company Pension, Can I Leave It To A Relative?

[bond]

I know I should be asking the pension company this and I will, but just wanted to get your thoughts. If I have a company pension (not final salary) but I die before I can take it (55+) can I leave it (the amount accrued) in a will to my mother or would the state just take it all ? I am a single man with no children and no intention to marry/have a civil partnership. Thanks.

[factor-fiction]

No- the pension is effectively an annuity which pays an income until you die. You may be able to nominate a dependent person though- is your mother dependent on you? I'll check up tomorrow- I'm a bit rusty. I think you'd have to opt for a lower regular payment though

[factor-fiction]

I meant nominate a dependent person to any 'death in service' payment rather than the value of the fund or an income

[boxtops]

My work pension gave me the opportunity to nominate someone else for a reduced payment to be made to my husband in the event of my death.

However, if you die in service (certainly through our scheme) it would pay out a lump sum death benefit, which would then form part of your estate - and you then say in your Will whether you'd like your mother to have any of it.

[factor-fiction]

The state wouldn't take any of it, by the way. The money belongs to the pension scheme - those that die early in effect subsidise those that live longer

[bond]

So if i die before I can take the pension (ie before 55) the money is just kept by the pension company/or goverment. It is just lost.

[factor-fiction]

See my answer just above yours- crossed posts I think

[boxtops]

No, the pension company pay out a lump sum death benefit - mine is twice my annual salary as a lump sum. That's instead of several years of monthly pension payments to you - your estate gets the lump sum, as if it were a life insurance policy.

[boxtops]

PS Nothing to do with the government, unless you are talking about State pension.

[ubasses]

No. Normally if you die before taking a pension the Company will pay out a lump sum of three or four times your salary to your nominated person. If you die within the first 5 years this would be paid less any pension already paid out. A spouse would receive 50% pension.
You will need to look at the rules for your pension scheme as there can be discretion for payments to be made to someone who is financially dependant on you.

[bond]

thanks so far for your answers, my employer will pay a death benefit to a nominated person I understand that. My concern is with the company pension (through standard life) - all the contributions I paid in and were matched by the employer - I cannot leave that "pot" to anyone? it just stays with standard life I die before I can take it.

[boxtops]

the "pot" you are accruing is what pays out the death benefit, whatever you put in your Will with cover what happens to that payout.

[boxtops]

PS I think you have the wrong end of the stick, rereading your last post - your employer doesn't pay the death benefit lump sum, it's the pension company.

[New Judge]

“the money is just kept by the pension company/or goverment. It is just lost.”

As has been pointed out, with the exception of lump sum or other payments to dependents (in accordance with the rules of individual schemes) the money is retained by the scheme. It is not “lost” as such because pension schemes operate like insurance policies. If you pay for a year’s car insurance but do not make a claim your premium is, at least as far as you are concerned, lost. But in fact it is used to pay claims made by other policyholders.

So it is with your pension. Pension schemes calculate their liabilities to their pensioners (and so the contributionsthey ask for) based on an average life expectancy following retirement. Of course not every pensioner will live for the exact term of this expectancy. Some will live longer, others shorter, so the lower payments made to those who live shorter than average are used to make the increased payments to those who live longer than average.

As has also been pointed out, the government has no involvement in this.

[bond]

so yes the pension contributions I made and my employer matched will be kept by the pension company if I die before I can take them. Boxtops, the death benefit paid by my company has nothing to do with my pension contributions. it is completely separated from pension contributions.

[factor-fiction]

> so yes the pension contributions I made and my employer matched will be kept by the pension company if I die before I can take them.

Yes, that's how pension schemes work. On the other hand if you live until you're 100 you'll continue to receive a pension until you die and will receive back far in excess of what you and your employer paid in. As I said before, the funds for those that die young in effect subsidise those who live longer.
It's the same with any state pension you might feel you've earned- it stops when you die and you can't leave any notional accumulated state pension fund to your mum