advice for my father

dazzadub

my father is 62

he has a number of private pensions and life insurance plans.

he has been wondering what happens to his pension if he passes away, does it go with him or does the remaining amount get paid out to next of kin or children if based in a will.

he is trying to get his money in order in case anything happens and also do a will.

jem16

dazzadub wrote: »

he has been wondering what happens to his pension if he passes away, does it go with him or does the remaining amount get paid out to next of kin or children if based in a will.

It depends if they have already been crystallised or not - ie is he currently taking a pension from them just now? If he is then it depends on how the pension was set up if anything passes on.

If non-crystallised the pension pot would pass on.

atush

With each pension he would have been asked to complete a form saying who would benefit from his pension should he die before taking it. therefore the pension would be outside the scope of his estate.

With some pensions, after they start there can be a spouse/dependents pension. If there is no spouse or dependents, and an annuity was purchased, there would be nothing passed on. If they were in Drawdown, there would be something to pass on

As far as Life insurance if these are whole of life, and he has no mtg, spouse or dependent children, he could be better off cashing them in for the residual value.

jamesd

Pensions and life insurance are generally trust-based and pay out according to the instructions given in an "expression of wishes" form, letter or whatever. They are not part of his estate and are not ruled by anything written in his will. This protects them from inheritance tax and also means they can be paid much faster than the sometimes very slow probate process. If no expression of wishes is made the trustees will decide, usually based on the will unless there are indications that it may not reflect his current wishes, say if he'd had a child, lost a spouse or child, or had remarried.

For a pension, the payout to anyone is free of all tax if he dies before he's taken any lump sum or income from a pension pot. After he's done either, or from age 75, a spouse can still take the money into a pension pot in their own name free of tax, but they or others taking it outside a pension pot have to pay a 55% tax charge. A very limited number of financial dependents can do as the spouse can, but check this very limited range carefully before relying on it.

If he uses a pension pot to purchase an annuity what happens depends on the type of annuity. A single life annuity pays out for the total number of years specified in its guarantee, if it hasn't reached that many already. Then it stops. A multiple life annuity would have some continuing payment to the specified survivor(s).

dazzadub

not sure on details as he set pensions up some years ago.


but he hasnt cashed any yet

xylophone

not sure on details as he set pensions up some years ago.

Then it is time to get out the policies and annual statements and see what is what.

He might benefit from having an Independent unrestricted Financial Adviser review his arrangements. http://www.unbiased.co.uk/

At all events it would be wise to see a solicitor and make a will.

xylophone

http://www.hl.co.uk/news/articles/what-happens-to-my-pension-when-i-die

This might be worth a read.

MikeAppleton

Most pension plans are written under trust and on the death of the policy holder, the trustees have the discretion to decide where the money goes (I'm talking uncrystallised funds). In most cases the benefits would pass on, however a trustee would need to look at it. Take as an example if the spouse killed the policy holder and the courts ruled she was culpable, a trustee could look at that and take the decision that paying out the beneficiary would be the wrong thing to do, and could instead pass it on to the crown (her majesty).

Another issue is suicide, this could also cause issues with the trustees. I had a case like this very recently, and it was determined that since the spouse didn't have any involvement, he could be paid out.

The reason it's usually written under trust is as someone mentioned, for estate planning, in that it falls outside of inheritance tax.