What Happens To Pension If Nominee Dies?

In most pension schemes, a nominee is a person designated to receive pension benefits in case of the pensioner's death. However, if the nominee passes away before the pensioner, there are certain procedures to ensure that the pension continues to the family or to another beneficiary. Understanding the rules governing such scenarios is important for both the pensioner and their family members to ensure a smooth transfer of pension benefits.

What Happens To Pension If Nominee Dies?

In Case of Death of Nominee Before Pensioner:

If the nominee dies before the pensioner, the pension does not automatically stop. Instead, the family must take specific steps to update the details of the nominee or beneficiary to ensure that the pension continues to the rightful recipient.

The pensioner or their legal heirs can appoint a new nominee or beneficiary. This can usually be done by submitting a fresh nomination form to the pension provider (whether it’s the government, an employer, or a private pension fund).

Steps to Take After the Nominee's Death:

• Notify the Pension Provider: The pensioner or their family members must inform the pension provider about the death of the nominee. This could be the employer, government department, or pension scheme authority.
• Submit Required Documents: The family must provide proof of the nominee’s death (like a death certificate) along with a new nomination form for the pension to be transferred to another nominee or legal heir.
• Legal Heirship: If there is no new nominee, the pension may be transferred to the legal heirs of the deceased nominee. In such cases, legal documentation proving heirship may be required (e.g., legal heir certificate or succession certificate).

If the Pensioner Dies and No Nominee Exists:

If the pensioner dies without having appointed a nominee, or if the nominee predeceased them and no new nominee was designated, the pension will typically be given to the legal heirs of the pensioner. This usually requires the submission of proof of the heirship, such as a will, legal heir certificate, or succession certificate.

The legal heirs will need to approach the pension authority with the necessary documents to claim the pension benefits.

Survivor Benefits:

In cases where the pensioner’s spouse was initially the nominee, the pension may continue to the spouse after the pensioner’s death, even if the original nominee (spouse) dies later. Survivor benefits may be applicable, and these benefits are generally governed by the rules of the pension scheme (whether government or private).

Dependent children may also be entitled to certain benefits in the absence of the pensioner's spouse.

Government Pension Schemes:

In the case of government pension schemes, the rules are usually clear about how pensions are transferred to legal heirs in the event of a nominee's death. For example:

• The Central Government pension scheme provides clear guidelines for appointing a nominee, and if the nominee dies before the pensioner, the pension can be transferred to the pensioner's spouse or legal heirs.
• Government employees must submit a revised nomination form after the death of the nominee to ensure continuity of pension.

Private Pension Plans:

For private pension plans, the rules may vary slightly depending on the insurance company or pension fund provider. However, most private pension plans allow a revised nomination after the death of a nominee. The process is generally similar to government schemes but could involve additional documentation.

The new nominee or beneficiary may be required to provide proof of the pensioner’s identity and relationship to the pensioner.

Tax Implications:

The transfer of pension to a new nominee generally does not have tax implications, but the family must consult with the pension provider to understand the taxation rules of the scheme.

If the pension is paid to legal heirs, taxation may depend on the type of pension (whether it is a lump sum or regular payments), and it may be taxed as income in the hands of the heirs.

Example:

A pensioner, Mr. Sharma, has appointed his wife as the nominee for his pension benefits. Unfortunately, Mr. Sharma’s wife passes away before him. Upon Mr. Sharma’s retirement, he informs the pension provider about the death of his wife and fills out a new nomination form, designating his son as the new nominee. The pension provider then processes the update and ensures the pension payments are made to Mr. Sharma’s son.