Did you know: that you can nominate beneficiaries for your pension? This ensures that, when you die, any unused pension pot isn’t lost and can pass on according to your wishes.

The situation is simple with an annuity: if it is a single life annuity, it dies with you; if it is a joint life annuity, the nominated person (almost always the spouse or civil partner) will continue to receive the benefits for the rest of their life.

The situation with a pension pot which is being used to drawdown income is different.  Here, whatever is left when the pension holder dies becomes part of their estate; currently this is outside the orbit of inheritance tax, although this is proposed to change in 2027.

To ensure that your wishes are respected, the best way forward is to nominate a pension beneficiary, who will receive your remaining pension fund when you die.  This can be a family member, a friend or even an organisation such as a registered charity.

You can have more than one pension beneficiary, and if you do this it is important to make clear how you would like any remaining funds to be split between them.  You can add or update your pension beneficiaries at any time.

Currently pensions pass down to the beneficiary before Probate, which can be useful if your estate is complicated and you want your beneficiary to receive the pension pot quickly.  This situation may be more complicated once pension pots fall within inheritance tax rules after April 2027.