What Is The Lump Sum Of Pension Benefits When Someone Dies
What Is The Lump Sum Of Pension Benefits When Someone Dies
When an individual who is entitled to a pension passes on, their beneficiaries or estates will be eligible for the lump sum pension benefits. The exact nature of this payment, how it is calculated, and who receives it depends on the pension plan and specific rules governing it. Let’s delve into the main points to consider when it comes to lump-sum pension benefits upon death.
What Is A Lump-Sum Benefit Pension?
Lump-sum pension benefit is a one-time payment made to beneficiaries or the estate of a deceased pension participant. Instead of receiving an ongoing periodic payment(e.g. annual annuity), beneficiaries may opt for or be entitled to receive a single lump sum. This amount often represents the remaining value of the pension funds.
Who Receives The Lump Sum Benefits?
The beneficiaries of the lump sum pension benefits depend on the deceased preferential choice as outlined in their plans or estate documents or by law. Typically the following individuals will receive lump-sum pension benefits:
- Spouse or Civil Partner
Many pension plans automatically nominate a surviving civil partner or spouse as their primary beneficiaries.
- Children Or Dependents
Most pension plans are allowed to also nominate children or dependents as their beneficiaries when they do not have any surviving spouse
- Estate Or Legal Representative
If there are no specific beneficiaries to inherit or enjoy the benefits, the lump sum payment goes to the deceased estates and will be distributed according to their will and interest by law.
Implementation Of The Two-pot System
The implementation of the two-pot system will not have a detrimental impact on the financial security of the fund. When a partial withdrawal is made by a member, it corresponds to a reduction in the fund’s obligation to that member. Consequently, the decrease in assets due to these withdrawals will be offset by a corresponding decrease in the overall liability of the fund.
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