Do I still need life insurance if I have a pension?

If you have a defined contribution pension, either a workplace pension or a private pension, and you die before you reach retirement age, your pension will usually pass tax-free to the person you nominated when you first started paying into it.

You can nominate whoever you want to receive your pension when you die, so it doesn’t have to be a spouse or child. You’ll need to make sure you complete an Expression of Wishes/ Nomination form though, stating who you want it to go to. Make sure you update this if your circumstances change, for example, if you get divorced.

If you die after you’ve retired but before the age of 75 and you were taking an income from your pension using drawdown at the time, your dependents can receive a tax-free income from your pension. However, if you die when you’re over the age of 75, your pension pot will still transfer tax-free, but your dependents will have to pay income tax on any income they receive from it. No inheritance tax is payable on pension pots.

This means that if you have managed to build up a large pension over the years, you and your loved ones will have valuable peace of mind that they won’t have to worry about money when you die.

It’s really important to speak to an advisor or pensions expert if you need help working out whether your pension might be able to provide your dependents with a sufficient financial buffer.

If you think this would be helpful you can find a local financial advisor on VouchedFor or Unbiased.co.uk or check out our guide on How to find the right financial adviser for you.

Author: wpadmin

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