What is an inherited pension?
An inherited pension, also known as a survivor pension, is a type of pension plan that allows the surviving spouse or partner of a deceased pension holder to continue receiving a portion of the deceased’s pension benefits. This type of pension is designed to provide financial security for the surviving spouse or partner after the death of the pension holder, ensuring that they can maintain their standard of living without the deceased’s income.
In an inherited pension, the surviving spouse or partner is typically entitled to receive a fixed amount of the deceased’s pension benefits, which is usually a percentage of the deceased’s final pension payment. The specific percentage and duration of the inherited pension can vary depending on the pension plan and the regulations of the country in which the pension is held.
There are several types of inherited pensions, including:
1. Joint and Survivor Annuity: This type of inherited pension provides the surviving spouse or partner with a fixed amount of the deceased’s pension benefits for their lifetime. Once the surviving spouse or partner passes away, the inherited pension ceases.
2. Life Annuity: In this case, the surviving spouse or partner receives a fixed amount of the deceased’s pension benefits for their lifetime, regardless of how long they live. This type of inherited pension ensures that the surviving spouse or partner will receive the same amount of income as the deceased.
3. Fixed Period Annuity: This type of inherited pension provides the surviving spouse or partner with a fixed amount of the deceased’s pension benefits for a set period, such as 10 or 20 years. After the fixed period expires, the inherited pension ceases.
4. Fixed Amount Annuity: This type of inherited pension provides the surviving spouse or partner with a fixed amount of the deceased’s pension benefits for their lifetime, but the amount may be lower than the original pension payment.
Understanding the details of an inherited pension is crucial for both the deceased’s family and the surviving spouse or partner. It is essential to review the pension plan documents, consult with a financial advisor, and ensure that the necessary paperwork is completed to activate the inherited pension. By doing so, the surviving spouse or partner can ensure a smooth transition and continue to receive the financial support they need after the death of their loved one.
