For each pension which the deceased was in receipt of, the executors should inform the organisation of the death, obtain details of any outstanding amounts due to or from the estate, and enquire as to continuing benefits. It is not always straight forward to obtain details of historical pension pots and in order to assist the Government provides a free pension tracing service which can be found here.
Pensions can fall under the following three headings:
State pension
Subject to any under or overpayment arising as a result of the pension being paid four weekly, the benefits of a state pension cease upon death. However, if the deceased was over state pension age but had deferred receipt of their pension, the surviving spouse may be entitled to claim additional statement pension or where there is no surviving spouse, the executors may be able to claim up to three months of unpaid state pension.
Defined benefit schemes
Once informed of a death, the pension provider should supply details of continuing benefits with instructions and documentation for claiming. Although, in most cases, the scheme administrators will automatically provide full instructions for claiming death benefits once they have been contacted, it is worth checking the scheme rules to ensure all potential benefits are covered. The terms of public sector pension schemes such as the Civil Service, Teachers, and the NHS are available online, as well as some private sector ones.
If the pension is in payment, continuing benefits may include:
- Pension for a guaranteed period
- Dependant’s (i.e. spouse or children up to a certain age) pension
- Pension protection lump sum
If the pension is not in payment (either because the deceased had not yet retired or the pension had been deferred), death benefits may include:
- Defined benefits lump sum (i.e. death in service)
- Dependant’s pension
- Refund of contributions in certain circumstances
Defined contribution schemes
Where the funds of a pot have been used to purchase an annuity, the particular terms of that annuity may include continuing benefits as with the defined benefit schemes above.
Where an annuity has not been purchased, the pot will remain as uncrystallised funds or residual drawdown funds. These funds will pass to the beneficiaries either as a lump sum or continuing pension. Whilst the scheme administrators will supply details of the value of the fund, the nominated beneficiaries and their options for taking benefits, as the benefits are usually payable at the discretion of the pension trustees to nominated beneficiaries, it is not normally the responsibility of the executors to collect in and distribute the funds.
It is important to understand the differing pension schemes to avoid continuing pensions being missed.
The next step
If you have any questions regarding this blog, please contact Nick Edwards.
