What would happen?

ognum

My friend is recently retired has some money in a SIPP as well as a recent pension pot in Standard Life.

No pension has been taken on either pot due to the amount of tax already paid this year a decision has been made to not draw on either sum until the start of the new tax year.

It is planned to pay the Standard Life sum into the SIPP is this sensible?

If my friend drop down dead today what would happen to the sum in Standard Life, would his dependents get any of the pot?

Last question, what is the standard range of costs for a manged SIPP?

atush

recycling a TFLS is subject to rules, so he'd need to check that,

As for death pre pension crystalisation, that would depend on what he put in his expression of wish forms. After crystalisation (ie commencing the pension, it will depend on how he takes the income.

DD pots can be inherited by a spouse, any money taken out of the pot and not left in for pension of the new beneficial owner is subject to a 55% tax charge.

If they got an annuity it would depend on the type, the guarantee, and any spousal benefits.

ognum

atush wrote: »

recycling a TFLS is subject to rules, so he'd need to check that,

As for death pre pension crystalisation, that would depend on what he put in his expression of wish forms. After crystalisation (ie commencing the pension, it will depend on how he takes the income.

DD pots can be inherited by a spouse, any money taken out of the pot and not left in for pension of the new beneficial owner is subject to a 55% tax charge
If they got an annuity it would depend on the type, the guarantee, and any spousal benefits.

Sorry but what is a TFLS?

Would the money in the Standard Life Policy be lost on death if it has not been transferred into the. SIPP or an no annuity bought?

atush

TAX FREE LUMP SUM 25% of the pot

All pensions go to whoever is listed in the declaration for that pension. Could be a spouse (even an ex spouse) children, even parents/siblings. The treatment will depend on the rules and if it has been commenced (ie started taking the pension) or not.

jamesd

Money in a pension pot is inheritable. If no benefits have been taken (no lump sum and no income) then it's inheritable without a tax charge. So the people specified in the expression of wishes would get the lot.

If benefits have been taken, a spouse or some very limited types of financial dependents can get the money into a pension pot of their own, otherwise they can choose to join the others and pay a 55% tax charge first then get the money outside a pension pot.

If income is taken using Income Drawdown the same inheritability applies, 100% to a spouse and some very limited types of financial dependent into a pension pot, else 55% tax charge to get it outside a pension. There is no inherent reduction in income to get this 100% spousal inheritance benefit, the normal amount of income can be taken.

If income is taken using an annuity what happens depends on the type or types of annuity that are purchased. Usually payouts after death in that case are nil because a single life, level payment annuity is the most common choice. But dual life annuities that would pay out at a reduced rate to a spouse until they die are available and in those cases the money would only vanish forever after the second death. The dual life policies are less popular because they reduce the amount of income that is paid out.

The pension trustees have the legal responsibility for deciding who gets the money. Normally an investor who cares will complete an expression of wishes form and unless there has been a change of circumstances since the wishes were specified the trustees would follow those instructions. Changes of circumstances that might cause them to not follow an expression of wishes can be things like marriage, divorce, birth or death of those mentioned. So they probably wouldn't pay out to an ex wife after a divorce and remarriage if the expression of wishes form said "to my wife _ ex name here_" and was filed before the divorce.

If there was no expression of wishes the trustees would consider relationships, dependents, any will and perhaps the rules of intestacy if there is no will and make a decision.

Moving the SL pension pot is probably a good idea. Whether moving it to the SIPP or moving both somewhere else is better depends on the investments used, charges and customer service levels desired. Assuming that the Standard Life pension is a common defined contribution one it's easy to transfer and can normally be done just by filling out a form provided by the place you want the money transferred to.

Costs for a managed SIPP depend on what management is desired. It could be several thousands or even tens of thousands a year for a large pot with lots of share selection going on or it could be a thousand or less if it's annual reviews of funds with active managers. Or less if the person is able to do most of the managiing themselves without help.

ognum

Thank you stush and Jamesd for your help I will pass on the answers and am sure they will be useful