Leaving a pension to your adult children

PippaGirl_2

I have a stakeholder pension which is set to be left (almost) equally to my 3 children which would go to them if I were to die before I start drawing on it.

How would this work out, if I were to die before drawing on it, is this pension pot given to them as money? Or can it only be transfered into pension pots for them?

Also, what if I were to take my percentage when I was 55 and the rest is left until I retire but I then die before I retire, is the fact that I have removed my percentage at 55 counted as me having drawn on the pension, or as I haven't had any regular payments, does this not count as being drawn on? So, would the remainder of the pension pot go to the children, or not.

Many thanks.

Aegis

If you die before taking any benefits and are aged under 75 on the day of death:

Your children can receive the value of the pension in their own hands free of tax.

If you die after taking benefits or after age 75:

Your children can receive your pension as a lump sum less a tax charge of 55%.

mania112

When you take your benefits the Stakeholder is converted to a different form of pension.

If it's converted to Annuity it is not possible to leave any to your children, it will die with you (or with your spouse if you have one and the Annuity is setup to pay them).

So make sure you're not buying an Annuity when/if you take your benefits.

You will want some form of 'Drawdown' if it is essential to leave something for your children.

PippaGirl_2

ah ok, so if I take a lump sum at age 55, I need to make sure it remains a stakeholder pension or somesuch in order to make sure the remaining amount is able to be left for my children on my death?

Or it can no longer be a stakeholder pension if I have taken a lump sum?

Apologies for my complete ignorance on this.

jem16

PippaGirl wrote: »

ah ok, so if I take a lump sum at age 55, I need to make sure it remains a stakeholder pension or somesuch in order to make sure the remaining amount is able to be left for my children on my death?

Or it can no longer be a stakeholder pension if I have taken a lump sum?

Apologies for my complete ignorance on this.

Once you crystallise ( ie you take benefits from it in the form of a lump sum, with or without an annual pension) the death benefits change.

If you take a lump sum with a pension under the normal annuity route, there would be nothing to pass onto children unless it was arranged with some sort of guarantee.

If you use income drawdown where you take a lump sum but the rest remains invested and you take an annual income from the investment, then the pension pot can pass to your children with appropriate tax implications.

mania112

As above.

So to directly answer your question. No, Stakeholder Pensions do not pay benefits post 55, it needs to move.

It will become either something known as 'income drawdown' or something known as 'an Annuity'.

Various differences, but with regard to Death benefits: there are none for children in an Annuity.

PippaGirl_2

mania112 wrote: »

So to directly answer your question. No, Stakeholder Pensions do not pay benefits post 55, it needs to move.

Is that the case even if I don't touch it at all? So when I am 55 it changes somehow? Will the company contact me about what I want to do with it then.

An IFA arranged for the stakeholder pension for me and he didn't mention any of that. I just assumed it could stay there until I retired if necessary.

Thanks everyone for your help.

jem16

PippaGirl wrote: »

An IFA arranged for the stakeholder pension for me and he didn't mention any of that. I just assumed it could stay there until I retired if necessary.

It can stay there until you are ready to retire. At that point you will decide what kind of pension payments you want to take either with the same provider or a different one.

dunstonh

An IFA arranged for the stakeholder pension for me and he didn't mention any of that. I just assumed it could stay there until I retired if necessary.

A correct assumption. IFAs are encouraged to think of accumulation and decumulation of pension funds as two seperate things. It is often best advice to have one product get you there (accumulation) and a different product/provider paying the income (decumulation). In some cases it will be the same product (typically more advanced investors).

Will the company contact me about what I want to do with it then.

No. It will stay in place until you reach the selected retirement age on the plan. You will then be given a limited selection of options (which will not cover all things available). If you do nothing it will roll over to 75 with you able to commence it when you like. When you do want to take the pension, you or your IFA will do the necessary research and admin to put what you want in place.