Are UK expat pensions inheritable by surviving spouses?

Retirement overseas is now the norm for many British couples, but what happens to pension payments when one partner dies?

It has to be said that a stress-free retirement in a warm country can extend not only expat pensioner couples’ lives, but also their capacity for enjoying their time together in a new country. However, when it’s time to say a final goodbye and take care of the practicalities connected with the death of a beloved spouse, money is perhaps the last thing on the surviving partner's mind.
Unfortunately, financial matters including pensions are omportant, with many retired couples putting off dealing with boring practicalities until it’s, simply and sadly, too late.

The majority of expat retirees nowadays have a mix of pensions, starting with the UK state pension and including workplace schemes and QROPS, all of which have different inheritance rules. As regards the UK state pension, since 2016 it’s been based on the individual’s working life history of national insurance contributions and cannot be inherited by a surviving spouse although what used to called widow’s benefit can be claimed. For those who’ve paid in under the previous pension rules, some spouses may be entitled to inherited payments, but the amount will vary dependent on personal details.

Typically, workplace pension schemes come with a spouse’s pension which is based on a proportion of the full payment, but entitlement will depend on the pension fund’s terms and conditions. Should the spouse have been nominated as a beneficiary, payments should automatically commence on the partner’s death, but stop when the surviving spouse dies and cannot normally be inherited by children of the marriage. Transferring out the pension scheme to a personal pension plan can ensure loved ones can inherit.

UK defined contribution pensions and QROPS cover most self-invested personal pensions and private pensions and have specific rules concerning inheritance and involving the saver’s 75th birthday as a key date. Should a pension saver die before that date, his or her spouse should be able to inherit any unspent funds on a tax-free basis. If the saver has informed the pension provider of his wish to have his spouse inherit, the funds will be placed outside probate and the remainder of the deceased’s estate. If the beneficiary dies after the age of 75 years, the cash can be drawn by the surviving spouse as an income, with income tax payable on withdrawals at the marginal rate provided the spouse has been named as a beneficiary. The age of the surviving partner isn’t relevant, meaning the spouse does not need to wait until he or she attains the age of 55 before they can draw on the cash as an income.