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How your ex might still inherit your pension

Updated 20 December 2022

3min read

Nick Green
Financial Journalist

Many people approaching retirement may be unwittingly naming an ex-spouse or ex-partner as their pension beneficiary upon their death. According to a Royal London study, out-of-date paperwork may put current partners at risk of missing out.

Over three quarters of a million people near retirement are at risk of passing their pension pot on to the wrong person when they die, new research by insurer Royal London has found. Those who have specified a partner as their pension beneficiary, only to divorce or separate but fail to update their wishes, are unaware that their remaining benefits may still pass to this ex-partner when they die.

The Royal London study looked at those aged between 55 and 64 who had remarried by the age of 50, who also had pension savings. It found that around 773,000 people were in this position, and therefore at risk of their pension being inherited by their former spouse or partner.

Pension benefits technically fall outside a person’s estate, so are not covered by a will. Savers who want to name a beneficiary of their pension pot must therefore complete an ‘expression of wish’ or ‘nomination of beneficiaries’ form when enrolling on a workplace pension or private pension scheme. If someone nominates their spouse, but then divorces and forgets to update this paperwork, the scheme’s trustees may be obliged to respect the original wishes.

This is a real hidden hazard for many pension savers, who may have joined their pension scheme decades ago and forgotten all about nominating a beneficiary. Further problems can arise when people switch jobs and move to new pension schemes, as then it’s easy to lose track of old pension pots. It’s relatively easy to trace old pension pots with the help of the Pension Tracing Service, but equally important to update the nominated beneficiary on each scheme.

Grounds for pension disputes

The nomination of beneficiaries (there can be more than one) on a pension scheme is not legally binding in the way that a will is, but is just an instruction to the scheme and its trustees. It may therefore be possible to contest this nomination if there is reason to believe it was out of date. However, this would at the very least be a stressful process, and probably lengthy and costly too. An ex-spouse named as the beneficiary of valuable pension benefits would have a strong claim on them, and may not want to give them up without a fight.

Helen Morrissey of Royal London said, ‘Over the course of our lives, many of us will be in a number of different relationships. The person we want to receive any pension benefits after we are gone is likely to change over time.  But if we have not told all of our past pension schemes about our new wishes and our new circumstances, there is a risk that the wrong person will stand to gain.’

Given that the Royal London study only looked at those approaching retirement age (those aged between 55 and 64), there are potentially many more people in the UK with pension savings that are nominated to pass to an ex-partner.

Don’t give your ex a pension windfall – follow these 5 tips

  1. Keep records of your pensions and providers and make sure your family can find them.
  2. Contact each provider to check who your ‘nominated beneficiary’ is, and specify one (or more) if you haven’t done so already.
  3. Keep a copy of each form you send back to pension providers.
  4. Review your nominated beneficiary if your relationship circumstances change.
  5. Keep your will up to date. Although pensions aren’t covered by your will, expressing clear wishes here may be useful in settling any disputes after your death.

Lastly: if you have a final salary (defined benefit) pension, different rules around inheriting benefits will apply, so check with your pension provider.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.