When a person dies before pension is claimed

richard_3095

My brother is 53 and he has about 4 weeks to live. He opted out of state pension arrangements and contracted for a personal pension that is said to have been issued under chapter 2 of Part 4 of the Finance Act 2004.

The letter I have received says It cannot be surrendered for a cash payment, assigned or used as a security for a loan.

I notice that in 2000, two letters were sent about possible mis-advising, but don't think my brother replied to them.

Anyway, I think my brother might have paid in about £8K. But he has not made contributions for several years now.

If my brother has paid £8K one thinks it's daylight robbery for Prudential to keep it all, simply because my brother is now dying so young.

Will my brother be entitled to any of the money he paid in, or is it now going to be pure profit for Prudential? Thanks.

richard_3095

My brother got divorced and I think ex wife entitled to half.

Transfer Fund Value: £63,804,57

MVR; £0.00

dunstonh

If my brother has paid £8K one thinks it's daylight robbery for Prudential to keep it all, simply because my brother is now dying so young.

Why does your brother think they are keeping it?

Will my brother be entitled to any of the money he paid in, or is it now going to be pure profit for Prudential?

The fund value will be paid out to the nominated beneficiary. If no beneficiary is nominated then Pru will ascertain the situation on death and decide who to pay it to.

richard_3095

What it is, that I've been spooked by "It cannot be surrendered for a cash payment".

But further down I read:

"Death Benefits Before Retirement: The value of the fund at date of death, plus any life cover, is payable as a lump sum. Prudential has discretion who to pay this lump sum to."

The thing is, my brother will need to get at money to pay for funeral expenses, and we are looking to his private pension arrangements for finances.

teddysmum

My husband is now taking his pension, but in his case, should he have died before he started taking, I as named beneficiary would have had his lump sum (ie 25% of the pot )which would have been payable at the time of retirement, but no pension thereafter.


The lump sum was tax free for him, on retirement, but I don't know what my position would have been.

noh

richard_3095 wrote: »

What it is, that I've been spooked by "It cannot be surrendered for a cash payment".

But further down I read:

"Death Benefits Before Retirement: The value of the fund at date of death, plus any life cover, is payable as a lump sum. Prudential has discretion who to pay this lump sum to."

The thing is, my brother will need to get at money to pay for funeral expenses, and we are looking to his private pension arrangements for finances.

On receipt of the death certificate Prudential will pay the lump sum fairly promptly.
The funeral costs do not need to be paid till after the event.

Make sure his expression of wishes as to the beneficary is as he wants it to be.

dunstonh

What it is, that I've been spooked by "It cannot be surrendered for a cash payment".

That is correct. A pension cannot be surrendered. That is not the same thing though.

"Death Benefits Before Retirement: The value of the fund at date of death, plus any life cover, is payable as a lump sum. Prudential has discretion who to pay this lump sum to."

And that is the death benefits explained.

The thing is, my brother will need to get at money to pay for funeral expenses, and we are looking to his private pension arrangements for finances.

The pension lump sum on death is paid tax free outside of the estate. It is not part of the estate. The funeral expenses are typically paid from the estate. So, either the executor uses funds from the estate or sale of assets within the estate or the the funeral director is paid after the pension lump sum is paid out (Which is typically only a couple of weeks).

jamesd

If your brother wants it he can ask them to pay it to him now because he has been diagnosed with a medical condition giving him a life expectancy of less than a year. They will want medical evidence and with just four weeks to go it is quite possible that they will not be able to pay before he dies.

Even though it is available in this situation, it might be better to keep it in the pension until after death, when all of it will be paid to the named beneficiaries outside his estate, which avoids any chance of inheritance tax and the possible need to wait for probate to complete. The named beneficiaries are not those in his will, they are whoever he has named in the "expression of wishes" form that he has provided to Prudential. If he has provided one, if not the trustees there will use their own judgement. He should make that unnecessary by sending an expression of wishes to them unless he wants to claim it for himself now.

Since he was married it is very likely that the former wife is the person on the expression of wishes, unless that was changed at divorce time. If he doesn't want her to get the money he should look into changing this.

He and you can forget the bits about inability to surrender, the things I've just described are the completely standard death benefits these days and aren't what the no surrender value things are addressing. You can expect exactly the same from every personal pension, including any you have yourself.

The divorce papers will say what should happen to it. for this type of pension I expect that it was already dealt with and some transferred to her already, leaving what is in there all for him or his named beneficiaries.

If he doesn't have a will, now is a good time to correct that. But do note that the will is not what is first followed by pension or insurance companies, they first follow the specific instructions given to them instead, using the will only to settle problems sometimes. If he had one but it was when he was married he may well want to change it now.

Undertakers routinely accept payment some time after a funeral, though quite often with a discount for payment before the funeral happens. No need to be concerned about this aspect. The person who arranges the funeral will be required to take personal responsibility for the funeral cost. Funeral costs have first priority for payments out of an estate, ahead of any other debts that there might be. Banks will normally accept a death certificate and provide a cheque to an undertaker if they are provided with an invoice from the undertaker. They will do this before probate, though practices differ and if you intend to rely on this the policies of he specific banks involved should be checked.

richard_3095

I got in touch with Prudential and in fact they needed to obtain a letter from my brother authorizing me or whoever to talk about the policy. Understanding then that that authority was needed before talking about the policy I thought I'd keep my comments to generalities. I asked about what is the significance of "Death Value" in general terms. I was seeking to know if that value was the lump sum that my brother would receive. She would not even talk about that, which I thought was a silly decision by her.

richard_3095

On the letter I have it says:

"Nominations of Beneficiaries: No."

What does this mean?

jamesd

No nomination of beneficiaries means that the trustees at Prudential will have to decide who gets the money.

Get an expression of wishes form from them that he can complete and send to them before he dies if he wants to avoid this. Then the money will go to whoever he nominates (though others can object and occasionally such objections succeed).

The trustees will normally seek information about his financial dependents and pay out to them, but they have complete discretion to pay out to whoever it makes sense to them to pay to. That won't be Prudential, of course, but it might not be the person or people he wants to get the money. If he has children by any relationship it'd probably go to them unless he's currently married and even then there's a high chance that much or all will go to the children.

If he wants more control he can go for the option of getting it before death himself, but even if he goes for that he should send a completed expression of wishes form to cover himself if the serious illness payment can't be made in time.

Try not to be too hard on Prudential. As well as you trying to be helpful they also have to deal with people trying to get things they shouldn't really be entitled to and even though he's dying they still have to protect your brother's personal information.