How do death benefits get paid?

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Guide to intergenerational wealth transfer

When it comes to DB schemes, it is dependant on the scheme rules of the member’s pension scheme.

The scheme rules will state if a spouse pension or dependant’s pension is available if the member passes away, and at what rate this would be paid.

Barefoot adds: "For example, a recent plan I saw indicated that in the event of the member’s death, the scheme will pay 50 per cent of the member’s pension to their spouse for the remaining amount of their life.

"Another point to note is that the scheme rules may be different if the member passed before the retirement age. I’ve seen some that would merely provide a return of the member’s pension contributions, without interest. In short, the member’s individual scheme rules govern it all.”

The member would have completed a nomination within their pension to say who their dependent is, to ensure the scheme can simply alter the income accordingly.

Cameron says: "One of the key things about being able to inherit someone’s pension is, you have to be nominated. [As the person passing on the pension], you have to make sure your expressions of wish have been updated, otherwise if you have only updated your spouse and not your children, your children would be forced to take a lump sum. 

"If you want your children to inherit your pension and have the ability to stay in drawdown, make sure you have nominated them to stay in your scheme. Nobody wants to think about dying, but the more organised you are for your death, the easier it will be for your next generation."

Ima Jackson-Obot is deputy features editor of FTAdviser