When was the last time you looked at your pension nomination forms? Specifically to check who you have nominated to receive your pension when you die? If it was many years ago and your circumstances have changed it is important to review these.
What happens to your pension after death?
New pension rules came into force on 6 April 2015. These changed the way death benefits can be paid from your pension scheme. The key change relates to the taxation of death benefits and whether you have reached the age of 75 when you die. The other change that’s worth noting relates to who you can nominate to receive your death benefits. You no longer need to nominate someone who is financially dependent on you.
Pensions are a useful, tax-efficient way to pass money through the generations. An expression of wish form will assist the trustees of your pension fund in their choice of beneficiaries. Trustees have discretion over who the death benefits are payable to. If there is no expression of wishes from you this could raise difficult questions for them.
Although you may have left instructions, an expression of wish form is not legally binding. They are however, important as they give clear direction to your pension trustees.
What happens to the pension if no instructions are left for trustees?
If you haven’t left instructions with your pension trustees they will need to try and establish your intentions. If you have nominated a previous spouse, an ex-partner or a family member who you are no longer in touch with, it will be difficult for the trustees to second guess your intentions. Do you want your family to have the worry that the trustees need to intrude in family circumstances and ask awkward questions at a difficult time? Simply because you made your nomination years ago and haven’t updated it. Although trustees can distribute the benefits in a manner contrary to the expression of wishes, if there have been changes to relationships, such as a divorce, it can create conflicts over who should receive the death benefits.
You should also look at any pensions you had with previous employers. It’s just as important to let them know where you have moved to as well as checking that your expression of wishes forms are up to date.
Although your pension entitlements will not normally form part of your estate and will not therefore be distributed under the terms of any Will, if you have made a Will the trustees may follow the provisions listed as a guide. Particularly if there is no expression of wishes form. However, when was the last time you updated your Will and does that too reflect your current family circumstances?
How can I ensure my wishes are met?
If you want to ensure that your pension scheme trustees take into account your current wishes, you will need to update your nomination form, lodge it with them and keep it up-to-date. You should also review your Will every few years to make sure it’s kept relevant. It is easy to put these on the list of things you keep meaning to do but if you have ensured that your Will and your pension nomination forms reflect your current wishes, it will save your family and dependents a lot of worry when you are no longer around.