Column: Balance Of Pension Upon Death

May 1, 2023

Carla Seely Bermuda October 2018

[Written by Carla Seely]

When you die, what happens to the money in your pension?

Anyone who knows me will know one subject I skirt around and immensely dislike talking about is death. I don’t even like using the word – it’s just so final.

For me personally, I’m not sure whether I’m afraid of dying, or if I’m more afraid of being told I’m going to die and only have a certain amount of time to live – I don’t want the sideways glances full of pity and the sympathetic “I’m so sorry” comments that inevitably accompany the latter. I can’t imagine what my mum felt when she was told at the age of 63 that she had terminal cancer and only one or two years to live. Unfortunately, she never made it to her 65th birthday. However, what she did do was make sure her affairs were in order and that her estate would be distributed as per her wishes.

A common question we get in the pension industry is regarding what happens to the balance of your pension upon death. It’s a valid question, the answer to which depends on whether it’s pre- or post-retirement, what type of pension product you have now, and what option you might select in the future.

First and foremost, when you register for a pension, you’ll have the option to designate a beneficiary. This applies both to your company’s pension plan [no matter whether it’s a defined contribution or defined benefit plan], and to individual pension plans. The beneficiary as it relates to your pension means, in the simplest terms, the person[s] whom you designate to receive the balance that is in your pension account in the event of your death.

So, when you enroll in your company pension plan or open an individual pension plan, there will be a section to fill out regarding your beneficiary designation. It will ask for the specific details of the beneficiary and what percentage of the pension balance you wish to leave them in the event of your death. The amount designated to the beneficiary will be represented as a percentage [e.g., 100% to a spouse]. Note that you may elect to have multiple beneficiaries [e.g., 50% to a spouse and 50% to a sister]. Most importantly, if there’s a balance in your pension plan when you die, who you leave it to and how you decide to split it is entirely up to you.

It’s also important to note that a beneficiary does not need to be a family member – you can leave it to anyone, including a charity. However, one disclaimer is that if you put down a beneficiary that is under the age of eighteen, you must include a trustee who will take care of the funds until the minor comes of age.

Once you’re enrolled in a pension plan, it may be many years until you retire and want to start receiving a retirement income from your pension account. But, no matter when the time comes, you’ll need to study the options available with the company that administers your pension plan, and also see what the competitors are offering to ensure you select a retirement option that supports your retirement goals. Whether you choose an annuity with monthly payments or select the drawdown method to receive retirement payments, each option has its own set of rules regarding how any residual balance will be treated with regard to a beneficiary.

As I tell all my clients, we work hard for the money we make and we cannot change our fate. But, we can make intelligent decisions about our retirement and the legacy we leave. So, sit down with your pension provider and make sure you understand each option and the impact your choices will have on your retirement. The last thing any retiree wants is to discover they are locked into an option that does not suit them long term!

- Carla Seely is the Chief Operating Officer at Freisenbruch. If you would like any further details, please contact her at or call +1 441 297 8686.

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