Beneficiary of a pension fund

Waterlooviller

My late Aunt had a SIPP pension fund - earning her an annual income for which she paid appropriate 40% taxes each year. I think it was a Drawdown income fund. She told me how much was in it and how much was received each month. Sadly she died recently and i have been told that the investment manager is going to liquidate the portfolio which means that i do receive a lump sum after having had to pay 55% tax on the amount within the fund. However this is not what i wanted, i wanted to continue with my Aunts annual income fund that we reckoned would then pay a decent standard of living for me for the next 11 years which would take me to age 55 years old when some of my other investments would start to kick in. This effectively would mean i could retire at 44 instead of the anticipated 55. However i've been reading that individuals cannot receive income drawdown until they are aged 55 years old. So taking the lump sum may well be my only option?? But its such a large amount of money that is just given to the Government? Doesn't sound right to me that my Aunt's wishes will not really be fulfilled. Anyone know any more details regarding this kind of transfer upon death.

mania112

Firstly, sorry for your loss.

Secondly, I'm assuming your Aunt was not married at the time of her death.

There is only one option, for you to receive the lump sum minus the 55% charge, unfortunately.

However, this isn't because of your age (the under 55 rule is not relevant in this situation). You are classified as a non-dependent as you was not her spouse, a child of hers under age 21, or in any other way reliant on your aunt financially.

non-dependents can only receive the benefit as a lump sum.

There is a way around this (a bypass trust) but this could only have been set-up during her lifetime.

mania112

Also, it's not the end of the world, you will have many options with the cash, and you may find benefits that you wouldnt have had by continuing the drawdown.

atush

If you were dependent on her financially, and there was some reason for being so, there could be a cause for review by the trustees. but in all likelyhood you will have to settle for the lump sum.

Even if the pension remained in your name, it would not have paid an income to you until you were 55.

At least be happy she was in drawdown and hadn't purchased an annuity as that might have meant you were left with nothing.

margaretclare

I think the SIPP provider would, if you asked them, explain exactly what your options are. My understanding is that the fund would be 'liquidated' but you would then have a useful 'pot' with which to set up your own SIPP plan. You wouldn't be able to put it into drawdown at an age when you can still earn a living by employment, but it could grow usefully and be there when you really do need it. You don't even need to put it into drawdown until you're 75 or so, at which time you won't have income from employment and it can be really useful to you, as it was to your late Aunt.

Don't get hung up on 'I wanted this but the rules won't allow it' but rather, look for what the rules will allow, take good advice and follow on from there.