My SIPP after me

zygurat789

I guess it just isn't possible to set up a family pension fund, it just seemed like a good idea but I suppose it would give rise to too many tax avoidance opportunities.
Thanks for all your help everyone.

Daniel54

zygurat789 wrote: »

I guess it just isn't possible to set up a family pension fund, it just seemed like a good idea but I suppose it would give rise to too many tax avoidance opportunities.
Thanks for all your help everyone.

I wouldn't give up - we all want to ensure the best for our spouse and our children ,particularly if we assume as the male that we will be the first to go.But estate/inheritance planning is something that can easily go wrong if one tries do DIY.It is complicated by the fact that goalposts will inevitably be moved along the way

There is an IFA qualification for trusts and ,even if you do nothing ,having someone set out the options I found was extremely valuable,as you can also leave monies into trust via a life insurance policy,be it a whole of life,second life or an onshore or offshore insurance bond.

With the caveat that it all depends on your particular circumstances ,value of your potential estate etc,there is considerable peace of mind knowing that you have left everything in good order and as one would wish.

SeniorSam

A Trust can, in itself, can act as a type of pension fund, provided the Trutees have been requested accordingly. The problem may be that Trustees, although they may be requested to act in a way that you wish , do not have to follow such a request .

Trustees do as they think best and the difficulty, if it exists, is selecting the Trustees as persons that may have a similar understanding and agreement to the way your thoughts may be and be preared to act accordingly.

The Discretionary Trust allows the Trustees 'free range'. They can administer that Trust in the way that they think best or try to follow the wishes of the Settlor, but are held responsible.

They have a duty of care in dealing with the Trust. The type of investments they should select, should be those of minimal risk to ensure that the assets of the Trust are best maintained for the beneficiaries.

Assuming that the Sipp fund were directed to the Trust for the benefit of the spouse and children, then it is the Trustees to administer that accordingly.

Importantly, the pension provider would have to agree that following the death of the member, the Sipp funds could be directed to the Trust. That is a most important point to establish, as some providers may not allow for this to happen.

As Daniel has mentioned, there are qualifications that are required to be able to advise on Trusts, which I passed in my career before retirement. There are Trust schemes that can be very useful in planning a suitable Inheritance Tax strategy and I have incorporated some of these in my own financial planning for the benefit of our children.

With advice for a good IFA, who has specialised in this particular area of financial planning, Inheritance Tax can be avoided or at least accounted for befoe the event.

Do bear in mind that the new government intends to add an additional allowance against inheritance tax in the next couple of years. Assuning that the doise happen, then a joint allowance may be as much as £500,000 each.

In that case, some planning may then not be needed, but at what time do we die? Plans can always be changed whilst we are alive and Wills may also be able to be changed within 2 years of death.

Sam

System

But I don't think there is the equivalent of a post-death Deed of Variation applying to a Letter of Wishes to pension trustees?

One point to be clear about would be the options open to the beneficiary of an inherited SIPP.
Ther original owner can ask for the SIPP to be passed on death intact to one or more beneficiaries, and they then own their SIPPs. Do those beneficiaries have the similar right to nominate their own beneficiaries?
Can that right only be exercised on their own death?

jamesd

SeniorSam wrote: »

They have a duty of care in dealing with the Trust. The type of investments they should select, should be those of minimal risk to ensure that the assets of the Trust are best maintained for the beneficiaries.

Minimal risk for anything but a short time could be a negligent failure to properly manage the assets of the trust, allowing them to be lost to inflation. For longer periods of perhaps 30 years it's been established that high equity percentages, up to 100%, maximise the potential value for beneficiaries. With trustees able to predict withdrawing levels they can quite readily match investment durations to anticipated needs, using equities for the medium and long term and deposits or bonds for short term.

jamesd

Clifford_Pope wrote: »

But I don't think there is the equivalent of a post-death Deed of Variation applying to a Letter of Wishes to pension trustees?

A beneficiary can vary their entitlement under a will. A beneficiary can similarly tell trustees of a discretionary trust that they wish to renounce their entitlement under the trust in favour of someone else. As the trust is discretionary the trustees are free to ignore or accept this.

Clifford_Pope wrote: »

Ther original owner can ask for the SIPP to be passed on death intact to one or more beneficiaries, and they then own their SIPPs. Do those beneficiaries have the similar right to nominate their own beneficiaries?

Clifford_Pope wrote: »

Can that right only be exercised on their own death?

Yes only on death if the money is to remain within the SIPP. Since they have the right to the money at any time they have the option to gift it at any time before death and/or to make pension contributions in their own name or that of another person that can have the effect of gifting it into a pension for someone else. Subject to limits like those that may apply to those on means tested benefits.

System

jamesd wrote: »

A beneficiary can vary their entitlement under a will. A beneficiary can similarly tell trustees of a discretionary trust that they wish to renounce their entitlement under the trust in favour of someone else. As the trust is discretionary the trustees are free to ignore or accept this.
.

I know most pension schemes are written as discretionary trusts.
But I am not sure that a pension beneficiary can re-write the deceased pension-holder's Letter of Wishes so as to direct the pension benefits in a different manner, ie in a way analogopus to a DOV.
Or are you saying that Letter of Wishes to a pension company can be altered by DOV?

jamesd

A deed of variation is legally binding. An expression of wishes to pension trustees or similar to discretionary trust trustees is not legally binding but if a person is renouncing their own entitlement it is likely that it will be accepted.

A letter of wishes from a beneficiary to a pension company's trustees cannot bind them, nor can a deed of variation that is legally binding on the will of the deceased. But they would be expected to pay attention to such things in their decision-making.

Tougher cases might be ones where the deceased provided for a discretionary trust with a person they know will not want any money from them as a beneficiary, or perhaps the children of such a person. And where they were explicit at the time that they did this that they knew that the person would not want the money and would perhaps attempt to reject it, saying that they did not want such a rejection to be accepted so that the money is available to the children upon their maturity and to the person in the event of their future unknowable need. In such a situation I expect an attempt by the person to renounce on their behalf and even more so that of their children to be rejected.

TH1878

Trusts are not regulated and you do not need a specialist qualification to advise on them, so be careful.

Plenty of 'Will writers' (no qualifications) out there willing to part owners from their money giving 'trust advice'

Look for someone with either the STEP Certificate (Diploma even better) or someone who has passed J02 and AF1

TH1878

zygurat789 wrote: »

I guess it just isn't possible to set up a family pension fund, it just seemed like a good idea but I suppose it would give rise to too many tax avoidance opportunities.
Thanks for all your help everyone.

It is possible to set up a family pension fund through an individual trust based SIPP. It wouldn't necessarily achieve what you want though and would need much more information (assets elsewhere, are you going to draw down on your pension etc) to see if it was worth you considering it