What is intergenerational financial planning and what does it really mean to a bereaved family on the death of a loved one?
Death benefits have changed. Before Pension Freedoms in 2015 only people who were financial dependants would receive pension drawdown benefits.
However, from April 2015 there have been significant changes in pension death benefits.
In simple terms, your pension benefits can be left on death to anyone, but it is important to note that if a potential beneficiary is non-dependent, they must be nominated (unless there are no dependants/nominees). However, nomination forms are limited in so far as they are not binding.
In most instances, benefits will be paid out at the discretion of the scheme administrator/trustee. They must consider all potential beneficiaries. The advantage of this approach is that if the trustees of the pension have discretion over who they pay death benefits to, the benefits are normally free from inheritance tax.
Drawdown beneficiaries can fall into three categories:
Dependant
Spouse, child of the member under 23, financial dependent etc
Nominee
Individual nominated by the member/scheme
Successor
Individual nominated by the beneficiary/scheme
It is beneficial to keep all three beneficiaries’ Flexi Access Drawdown (FAD) options open on death and for all potential beneficiaries to be named on the nomination form.
Family matters
In today’s society many people come from a blended family through divorce, remarrying and having second families. and, as a result, might want to consider passing benefits to a wider group of people who can benefit. By having a trusted adviser who understands pensions legislation and the wider family, you can ensure that your pension benefits can go to the people you want.
The completion and regular review of pension death benefit nomination forms has never been more important. It is also equally important to ensure that, wherever possible, you are having conversations with the potential eventual inheritors of these pension benefits.
How we can help
At Armstrong Watson our quest is to help our clients achieve prosperity, a secure future and peace of mind.
We can provide a full review of your pension arrangements, with an initial meeting with our compliments in the first instance, to help you to understand, based on your individual circumstances and arrangements, the position with regards to your current pension plans and whether this is an area you need to consider.
Please get in touch with justin.rourke@armstrongwatson.co.uk or call 01768 222030
