Who receives the money from your insurance plan if something happens to you?

Do you know who will receive your pension savings in the event of your death? In just 10 minutes, you can fill out your beneficiary declaration and thereby secure the right persons financially for when you are no longer around. Consumer economist in PFA Carsten Holdum explains the rules:

The advice from stress coaches and psychologists is often to live in the present. Although this advice is wise, it may sometimes be an advantage to think ahead and make reservations for unexpected events. This also applies to the question about who inherits the money from your pension savings and life insurance in the event of your death*.

It may have a significant financial impact on your dependants if it is not the right persons who are going to receive the money. Therefore, it is important that you look into your plan. As a starting point, your “next of kin” is the beneficiary of your pension plan, but the definition of “next of kin” was changed by statute in 2008, and it may be of significance to you.

Who should receive the money from your pension plan?

If your pension plan was established after 1 January 2008, your spouse/registered partner or your cohabiting partner receives the money from your pension plan in the event of your death. In a cohabiting relationship, you do not need to be married – but you must have been living together for at least two years or expect a child together**. If your pension plan was established before 1 January 2008, your cohabiting partner will, as a starting point, only receive the money if you are married or live in a registered partnership, otherwise, the beneficiary is determined by the Danish Inheritance Act.

This is explained by PFA’s consumer economist Carsten Holdum.

“The beneficiary rules were changed by the Danish Parliament in 2008 resulting in that a cohabiting partner in the future also is considered to be next of kin in the standard appointment of beneficiary in your pension plan. This means that in the event of your death, your partner receives your entire pension savings, while your children do not receive anything. If your plan was established before 1 January 2008, and you have not changed the appointment of beneficiaries, the money will firstly go to your spouse or registered partner. If there is no spouse or registered partner, the money will go to your children. If you live together in a non-marital relationship, your cohabiting partner will thus not receive a part of your pension plan,” Carsten Holdum explains.

Remember that you can always change your beneficiary declaration. This way, you can choose to appoint your cohabiting partner as beneficiary even though your plan was established before 2008. Carsten Holdum emphasises that if you spend 10 minutes on your beneficiary declaration, it will put your mind at rest when you know that your loved ones are provided for in the best possible way in the event that you are no longer around.

Appoint your beneficiaries and enjoy life

It may be large amounts of money that can come into play. In total, the 4.3 million people in Denmark saving up for pension have savings worth more than DKK 2,300 billion, according to figures from Statistics Denmark***. 

“The pension savings make up a large part of most people’s savings, and therefore, appointment of beneficiary is of great importance for how your property will be distributed after your death. If your pension plan was established before 2008 - and you are in a cohabiting relationship but not married or in a registered partnership – you must consider whether you are content with your children receiving your pension plan in the event of your death, or if you would like to change the beneficiary declaration in order for your partner to receive a part of your property. Furthermore, you must in any case consider whether you want your children to receive your entire pension or only parts of your pension in the event of your death,” Carsten Holdum explains.

Protect your loved ones in the event of your death

He emphasises that if your next of kin in the beneficiary declaration - as described above – already meets your wishes, there is no need to make any changes. The most important is that you have considered the possibilities and who is to receive the money in the event of your death. In that connection, you may consider to whom you have the closest connection, or who depend financially on you the most.

“We recommend that everyone affirmatively make a decision on who is to receive the money. But we cannot know who your next of kin are, just like we do not know how you wish to distribute your money. It is therefore important that you consider whether your children for instance are to receive your money because they are your flesh and blood, or whether your spouse/partner is to receive the money because it may be difficult to support the family if you pass away before the children grow up,” Carsten Holdum says.

He adds that once you have done this, you can lean back and enjoy life with peace of mind.
“Because that is what it is all about,” Carsten Holdum says.

A piece of advice on beneficiaries

• Your next of kin will automatically be made recipient(s) of the payout in the event of your death. This is to ensure that someone will receive your money in case that you have not actively appointed a beneficiary.
• You can, as mentioned, change the appointed beneficiaries yourself - this may for instance be your cohabiting partner, your children, stepchildren or parents. You can appoint one or more beneficiaries. 
• When completed, please return the beneficiary declaration to: PFA Pension, Sundkrogsgade 4, 2100 Copenhagen Ø, Denmark (as stated on the declaration)
• You may also call PFA’s Advisory Services Centre at (+45) 70 12 50 00 and learn more about who you can appoint as beneficiaries.
• If your life recently changed – you, for instance, got married, divorced, moved in with or left a boyfriend/girlfriend – you should in particular consider if the right person still is the appointed beneficiary.
• Appointment of beneficiaries on pension plans must be made through a pension/insurance company, and is NOT determinable through a will. 
• If you change to another pension company or transfer from an average interest rate plan (PFA Traditional) to a market rate plan (PFA Plus), you will have to make a new appointment of beneficiary, and changes in previous appointments of beneficiaries will not be transferred.  
• If you are single, your heirs of the body - meaning children, grandchildren etc. - will as a starting point receive your money in the event of your death. If you do not leave any heirs of the body, the money will go to heirs according to your will. 

Sources and notes:

* In this context, life insurance is only relevant if you die before retirement. Both life insurance and pension savings are paid out in compliance with the beneficiary declaration.
** You must have lived together on the same address in a relationship comparable to marriage for at least two years or have/expect children together at the time of death.
*** Statistics Denmark: http://www.statistikbanken.dk/10503 and http://www.statistikbanken.dk/statbank5a/SelectVarVal/Define.asp?Maintable=PENS3&PLanguage=1. Tax has been deducted from the amount on payout for plans where relevant.
**** ‘Denmark in Figures 2016’ from Statistics Denmark.
***** Statistics Denmark: http://www.statistikbanken.dk/10503 and `Denmark in Figures 2016’.