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Looking after the pension affairs of a loved one after their death
At one time or another most of us are faced with dealing with the death of a loved one. This can be devastating on an emotional level while there are still lots of practical things that need to be done. We give some guidance here that should help you deal with their pension affairs, and we point you to further guidance on other tax matters arising after a death.
How soon do I need to tell financial institutions about their death?
There is no prescribed time limit, but it makes sense to do this as soon as possible – especially if the deceased was receiving regular income that needs to stop to prevent money having to be repaid. Telling organisations such as pension providers or life assurance companies quickly can also enable them to make payments that become due to the family as soon as possible.
What is the best way to contact organisations?
At the current time, it makes sense to do as much online as possible as many employees will be working from home. You can telephone, but all organisations are likely to have fewer staff available to take calls. If you do telephone, make sure you take the name of the person who you spoke to and keep notes of the call. It is always possible to write, but many offices will be closed at the moment or have very few staff available.
We note below the best way to contact HMRC and DWP as well as other financial institutions.
How do I find out if the deceased had pension policies and life assurance?
Assuming you are executor of the estate, or the next of kin, this should be relatively straightforward. Of course, pension providers and insurance companies do need to be very careful that they only make payments to the correct people and are likely to want to see a death certificate, verify your identity and to understand your relationship with the deceased.
Normally pension schemes and life assurance companies write to members at least once a year, providing details of the policies. You may be able to find those letters. Alternatively, you may find regular payments on the deceased’s bank statements or payslips that will help you trace the companies.
If the deceased was employed at the time of death, you can ask their employer if there is a company pension scheme or any death benefits that might become payable. Similarly, if you know of any previous employers, it may be worthwhile contacting them to see if they can help. Once you have the relevant details, it should be easy to contact the relevant pension payer or insurance company.
The Money Advice Service website has some more information about tracing lost pensions, including using the Pension Tracing service, which might also be helpful if you are trying to trace a late relative’s pensions.
How do I get the deceased’s pension and life assurance monies paid to me?
Where there are lump sums that can be paid out, often the trustees of the relevant scheme will have wide discretion as to who the available funds can be paid to, but if the deceased had expressed any preference they are likely to take those wishes into account. Most often funds are paid to spouses, children or other members of the deceased’s family or household. You can put your case to the trustees, but they will do what they think is best.
Instead, if a pension was being paid to the deceased, it is possible that a pension (often at a reduced level) may continue to be paid to a surviving family member. The pension company will be able to advise.
You can read about the tax consequences of any such pay-outs in our bereavement section.
How do I tell HMRC and the DWP about their death?
Why would I want to tell HMRC and DWP about their death?
HMRC can finalise the deceased’s tax affairs to date of death, enabling personal representatives to pay out the estate. They will also stop any tax credits claims, meaning that there is less danger of overpayments being made that will have to be repaid. You can read more about this in our bereavement section.
It is also important to tell HMRC if you, or someone else, will start to receive taxable income as a result of their death, for example from pension policies. This will make sure HMRC have the information they need to issue the correct tax codes to collect the tax due.
DWP pay many state benefits, including the state pension, and need to stop paying all benefits to the deceased. You can read about what happens to the deceased’s state pension if they were married or in a civil partnership at the time of their death in our bereavement section. If they had deferred their state pension, you can also read about that in our bereavement section.
Where can I find more information on dealing with the deceased’s tax affairs?
The bereavement section of our website provides a lot of information.
We suggest you read through it to help you understand the main tax issues that arise when someone dies. If you need personalised help and advice, the page Getting help with bereavement and inheritance tax signposts you to more sources of help.
Contact: Gillian Wrigley (click here to Contact Us)