Dying before pensionable age - options

peakoil42

My brother is 43 and has a few weeks left to live from terminal lung cancer. He resigned from his job with a large American Bank a few years back, and has a frozen pension scheme with them (I think a final salary based scheme, but not exactly sure).

So, what are the options? Because he has less than a year to live, is his ex-employer required to provide what the HMRC calls a "serious ill health lump sum" or is this depending on their scheme rules, and/or discretion?

He has been in touch with them, and they are currently saying that they only offer a spouse 50%, but he has no spouse or dependents, just myself and our parents. Unofficially they suggested he look into transferring to a new pension scheme that offers payout to designated beneficiaries on premature death. He has a letter saying that he has a Guaranteed Transfer Value of around £150k - presumably this is what could be put into a new pension scheme. The problem is that I am not sure he has enough time left to get this organised. And would it be allowed anyway given his situation?

So are there any other options? I will be able to look at letters and documentation in a day or so, if more information is needed.

Thanks for any help/advice

Richard

mania112

I'm almost certain it's scheme specific and not HMRC rules.

That's a tough one, because the scheme aren't helping. The pension will disappear on death without a spouse or dependent.

So his only option is to transfer it. Pick up the phone today after finding an adviser at https://www.unbiased.co.uk

He/she can/will take their fee from the transfer and then help with the serious ill-health claim.

They would need to find an understanding provider, because for the provider they're taking the transfer and shipping it straight back out again.

Good Luck

xylophone

http://www.pensionsadvisoryservice.org.uk/occupational_pensions/death_benefits
Check the precise rules of your brother's scheme

Would a SIPP be a possibility for transfer?
http://www.mwpensions.co.uk/handouts/Death_Benefits_post_pbr.pdf

http://www.hl.co.uk/pensions/sipp/frequently-asked-questions

Final salary schemes can also be transferred to the Vantage SIPP, however, we would require you to take advice from a professional financial adviser. For further information, or if your pension type is not listed above, please call our Helpdesk on 0117 980 9926.

http://www.hl.co.uk/advice

Any help above? Sadly, it looks as though time is of the essence.

RichandJ

No other advice than what Mania & xylophone have said except tell the current administrators he may die within the next year. Try to speak to a manager, not a bog standard admin person as they may have a better understanding.

My condolences at what must be a difficult time.

MumOf2

So sorry that your brother is so ill - it must be a difficult time for you all.

Most defined benefit schemes have a 5-year pension in payment guarantee that is paid either to a nominated beneficiary or into a member's estate if there's no nomination or to someone decided by the Trustees of the scheme. Provision for this will be laid down in the scheme Rules which will be available from the scheme Administrators. This guarantee is also applicable for deferred members (which your brother will be if he has actually resigned from the company).

I would strongly suggest that you obtain a copy of the Rules to see if any guarantee applies.

MumOf2 (and defined benefit pension scheme Trustee)

jamesd

Your brother is in one of the few situations where a transfer out of a defined benefit work pension is a good idea. The unofficial guidance from the pension scheme is almost certainly correct, though it is worth an IFA checking the death benefits.

A normal personal pension provides 100% of the money in the pension pot on death if no benefits have been taken (no lump sum or income) and access to 100% of the money (some taxed) if a doctor says that life expectancy is likely to be less than a year. The death benefit is paid outside the estate, based on an expression of wishes form provided to the pension company. This can help with inheritance tax planning and can be faster than probate and inheritance processes.

Visiting unbiased.co.uk and finding an IFA who can commit to acting urgently enough to transfer to a scheme that can act quickly to receive transfers is the way to go. Ensure the IFA knows that death before transfer will result in 100% loss of the £150k so fast transfer is more important than best price for holding investments long term.

mania112

jamesd wrote: »

Your brother is in one of the few situations where a transfer out of a defined benefit work pension is a good idea. The unofficial guidance from the pension scheme is almost certainly correct, though it is worth an IFA checking the death benefits.

A normal personal pension provides 100% of the money in the pension pot on death if no benefits have been taken (no lump sum or income) and access to 100% of the money (some taxed) if a doctor says that life expectancy is likely to be less than a year. The death benefit is paid outside the estate, based on an expression of wishes form provided to the pension company. This can help with inheritance tax planning and can be faster than probate and inheritance processes.

Visiting unbiased.co.uk and finding an IFA who can commit to acting urgently enough to transfer to a scheme that can act quickly to receive transfers is the way to go. Ensure the IFA knows that death before transfer will result in 100% loss of the £150k so fast transfer is more important than best price for holding investments long term.

Could there ever be a case where a Money Purchase pension provider can refuse to pay out because the plan is less than a year old (for example)?

I'm sure not, but worth checking?

GhIFA

mania112 wrote: »

Could there ever be a case where a Money Purchase pension provider can refuse to pay out because the plan is less than a year old (for example)?

I'm sure not, but worth checking?

The payment from a personal pension on either death or serious ill health commutation are legislative provisions - I think any provider that that tried to hold on to the money due to the plan being less than a year old would be on a very sticky wicket.

jamesd

I don't think that a personal pension provider is required to pay out in the life expectancy under one year case, say if the trustees aren't confident in the diagnosis, but since transferring a standard personal pension is easy and all of those I know of do it, that really doesn't matter much. Just something for the IFA to check if there is a desire to take it, or some of it, while still alive.

I don't think it's possible to avoid paying out on death but some might handle that better than others and it's the sort of thing a good IFA would handle. Things like making it easy, if desired, to split the payout among different people or organisations and do part into pensions (for any part where benefits were taken) might be better done at some providers than others.

Taking some of it but not all of it while alive might be desirable. Depends on whether there's any potential for inheritance tax or avoiding the delays of probate and whether the brother actually cares about that or not.

Time pressure, DB and those sorts of questions make this a natural job for an experienced IFA who can save far more in money and hassle value combined than the costs of getting the work done.

peakoil42

Thank you all for your advice.

I have had a chance to look at the scheme rules that apply, and it is clear that the only option is to transfer.

I will be contacting an IFA on Monday to start the process, and already have the transfer form from the company.

Regards

Richard

xylophone

I will be contacting an IFA on Monday to start the process, and already have the transfer form from the company.

I hope all will go smoothly for you at this very sad and stressful time.