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Where Taxpayers and Advisers Meet

Will my wife get any additional pension after I pass away

bdesouza29
Posts:4
Joined:Tue May 12, 2020 9:48 pm
Will my wife get any additional pension after I pass away

Postby bdesouza29 » Mon Jan 25, 2021 11:03 pm

Hi,
I'm a 40 yr old man. I have a salary of £50k while my wife has a salary of £10k. I pay in around £500/month into my pension while my wife pays £100/month (Her employer literally gets away by paying £9 into her pension, so I set up a private SIPP for her). In my retirement, obviously I will be getting more pension and me and my wife can make ends meet well. However, If I were to go early (to the heavens), will my wife benefit from all the extra pension which I've paid in my lifetime? or will she end up with a paltry pension based only on the £100 she pays? I'm asking because if she won't benefit from any of my contributions, then I'd rather decrease my pension contribution and increase her contribution.
Kindly advise, as I have no idea what is the right thing to do.
Thanks.

bd6759
Posts:3588
Joined:Sat Feb 01, 2014 3:26 pm

Re: Will my wife get any additional pension after I pass away

Postby bd6759 » Tue Jan 26, 2021 9:42 pm

You need a financial advisor to look at your pension schemes.

ben_power
Posts:62
Joined:Tue Feb 27, 2018 8:34 pm

Re: Will my wife get any additional pension after I pass away

Postby ben_power » Fri Jan 29, 2021 11:29 pm

In most circumstances the answer is yes, your wife will benefit from your pension but it depends on what type of pension you are paying into yourself.

If you're paying into a Defined Benefit (DB) scheme then typically there will be a spouses benefit. The benefit will depend on when you die and the scheme rules so ask the provider/scheme administrator/trustee/HR for these. In my experience (IFA) there is normally a lump sum payment of you die within the first 5 years and/or an ongoing income ranging from 35-65% of the income you were receiving as a pension for the rest of her life.

I suspect you have a Defined Contribution (DC) scheme, essentially a pot of money that both you and your employer pay into. Probably the same as your wife's although by the sounds of things your employer pays more into it. The death benefits on DC scheme are typically better than DBs. I often advise clients to ignore the word 'pension' and start to view it as a 'bucket'. The bucket has a set of rules but it is nothing more than a savings pot. As soon as you think of the pension you conjure up lots of assumptions. The rules of the bucket are complex but the death benefits can be simplified as follows:

The bucket never dies, it keeps getting passed on. If you die, you can leave it to your wife, if she then dies she might leave it to children, they can also leave it to someone, it just keeps going until the bucket is empty. It NEVER forms part of your estate for inheritance tax. Its an extremely useful 'bucket' to pass wealth/assets onto loved ones.

If you die 'before' you're 75 you wife get's the bucket tax free. She can draw income or lump sums (or the lot) free from tax.
If you die 'after' your 75 she still gets the bucket but whenever she draws money out of it she will pay income tax so she'd want to be careful how much she draws out each tax year.

Your decision to which 'bucket' to pay into will depend on few things but ultimately she will benefit one way or another.

If you want any additional help drop me a direct message, happy to help.


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