What Happens to a Pension When Someone Dies

What happens to a pension when someone dies is one of the most common and important questions families face when dealing with a bereavement. The answer depends on the type of pension, whether beneficiaries were nominated, and when the death occurred relative to the pension being claimed.

## Defined Contribution Pensions, What Happens When Someone Dies

Defined contribution pensions, the most common type of workplace pension, are essentially savings pots. When the member dies, the pot goes to whoever was nominated as beneficiary. If no nomination was made, the pension scheme trustees decide who receives the funds, usually considering the deceased's spouse, civil partner and dependants.

If the member dies before age 75, the pension can be paid to beneficiaries as a tax-free lump sum or as a drawdown pension. After 75, beneficiaries pay income tax at their marginal rate. This makes finding these pensions quickly particularly important, tax treatment may depend on how soon the claim is made.

## Defined Benefit Pensions, Spouse and Dependant Benefits May Continue

Defined benefit (final salary) pensions often include spouse and dependant benefits. When the member dies, a reduced pension, typically 50% of the member's entitlement, continues to be paid to the surviving spouse or civil partner for life. Some schemes also pay pensions to dependent children.

These continuing pensions can be worth tens of thousands of dollars over a lifetime. If the family does not know the pension exists, these payments never begin.

## Death in Service Benefits, Separate from the Pension Itself

Death in service benefits are lump sum payments, typically worth 2-4 times the deceased's annual salary, paid by the pension scheme when a member dies while still enrolled. They are separate from the pension pot itself and are frequently the single largest unclaimed asset in an estate.

If the deceased was earning $57,000 and their scheme offered 3x death in service, that is a $170,000 tax-free lump sum. If no one knows about the scheme, no one claims it. Executors should ask former employers directly whether death in service cover was in place.

## State Pension, What Happens on Death

The State Pension stops being paid when someone dies. However, a surviving spouse or civil partner may be able to inherit some of the deceased's State Pension entitlement, particularly any protected payment above the full new State Pension. Arrears owed up to the date of death are paid to the estate.

For guidance on State Pension inheritance, visit GOV.UK.

## Overseas Pensions, Foreign Entitlements Often Overlooked

If the deceased worked abroad at any point in their career, they may have pension entitlements in other countries. Australian superannuation, Malaysian EPF, Singapore CPF, UAE gratuity, all of these survive the member's death and can be claimed by the estate or nominated beneficiaries. Foreign pensions are almost never found without specialist tracing.

## How to Find Pensions in an Estate

The UK government's Pension Tracing Service can help locate UK pensions by providing contact details for providers. Equivalent official registries exist in most other jurisdictions.

Register free today, Global Pension Identification Report ($799) fixed fee, Full refund if we find nothing material.

*This article is for informational purposes only and does not constitute financial advice. PensionHunter is a research and administrative assistance service and is not regulated by the FCA or any equivalent financial regulator.*

At PensionHunter, building the World's Trusted Pension Identification Platform, we help people across 41 countries find pension records they had forgotten about.