Can foster carers nominate beneficiaries for their pension?

The key point is that pension death benefits are usually dealt with under the pension scheme’s rules rather than through your will. A completed nomination tells the scheme who you would like to receive any benefits, but the final decision may rest with the scheme administrator or trustees.

What a nomination can cover

Depending on the scheme, you may be able to nominate one person or several people to receive benefits such as a pension fund, a lump sum, or income from a pension after your death. You can usually set out proportions, for example by allocating different shares between beneficiaries, although the scheme’s own form and rules determine what is permitted.

Possible beneficiaries may include:

• a spouse or civil partner;
• an unmarried partner;
• children or other family members;
• someone who is financially dependent on you; or
• another individual allowed by the pension scheme.

A child you have fostered is not automatically treated in exactly the same way as a biological or legally adopted child for every pension purpose. If you want a foster child or former foster child to benefit, ask the scheme whether that person can be included and whether any evidence of dependency or relationship is required.

Why the nomination may not be binding

Many personal and workplace pension schemes use trustee or administrator discretion when paying death benefits. This can help keep benefits outside the estate for some legal and tax purposes, but it means the nomination is normally an important instruction rather than an absolute command. The decision-maker may consider the nomination alongside the scheme rules, your circumstances and the people who were financially dependent on you.

Some arrangements offer a binding nomination or direction, but this is not available under every pension and may have strict conditions. It may need to be renewed periodically or accepted formally by the scheme. Check the wording carefully rather than assuming that a standard expression-of-wish form creates a guaranteed entitlement.

How this differs from a will

Your will generally controls assets that form part of your estate. Pension death benefits are often considered separately, so naming someone in your will does not necessarily replace a pension nomination. The two documents should be consistent, particularly where you have a spouse, children, a partner, dependants or people you have cared for as part of your fostering arrangements.

A will can still be relevant to other assets and to wider arrangements for children, but it is not a substitute for checking each pension scheme’s beneficiary process.

Different pension types have different rules

• Defined contribution pensions: the remaining fund may be used to provide a lump sum, income or another benefit for eligible beneficiaries, subject to the scheme’s rules.
• Defined benefit or final salary pensions: the scheme may provide a spouse’s, civil partner’s or dependant’s pension, but the entitlement and calculation usually follow fixed scheme rules. A nomination may have less influence over these benefits.
• Workplace pensions: the provider or trustees may have a specific online process or paper form. Leaving an employer does not necessarily remove the need to update the nomination.
• Self-invested or personal pensions: the provider’s terms determine which death benefits can be paid and how beneficiaries must be recorded.

When to review your nomination

Review it after marriage, entering or ending a civil partnership, separation, divorce, the start or end of a significant relationship, the birth or adoption of a child, a death in the family, or a change in financial dependency. Fostering circumstances can also change, so consider whether the person you previously nominated still reflects your wishes and the scheme’s definition of an eligible beneficiary.

Make sure the scheme has your current contact details and that the nomination has been received and recorded. Keep a note of the pensions you hold, the provider for each one and where the latest paperwork is stored. If you have more than one pension, a nomination made for one arrangement will not normally update the others.

Tax and professional advice

The tax treatment of pension death benefits can depend on the type of pension, the beneficiary, the form of benefit chosen and the circumstances at the time of death. It can also differ between a lump sum and an income. Because these rules can change, ask each provider how its benefits are taxed and consider regulated financial or legal advice if your arrangements are complex.

To check your position, request the scheme’s death-benefit and beneficiary guidance, confirm whether the nomination is discretionary or binding, identify who can receive benefits, and ask whether any supporting documents are needed. This is especially important where you want to provide for someone who may not fall within the scheme’s standard definition of a dependant.