Draw Down Death Benefits

ctrob67

My father in-law died recently leaving a draw-down pension.

His financial adviser wanted my mother in-law to move the pension to a different company as he no longer worked for the company that provided (as my mother in-law recounted conversation).

She is happy with the draw down/pension as is and asked for it to be left where it is. The adviser has now sent forms requesting to set up a new personal pension plan and open a portfolio for her (this is a transact product) and authorising the the payment of 3% to set this up and 1% a year there after to administer it.

What puzzled me is the third form we have to complete sets out the beneficiaries for the death benefit: this got me asking myself why my mother in-law can't continue to receive the payments she receives at the moment, as a death benefit from her husband's pension, without having to go through the expense of setting up a new pension? The wording implies that the administrators of her husband's fund can continue to pay the draw down to her instead.

Does her financial adviser need to set up a new pension or can we just talk to the administrators to pay her instead?

Or is it necessary to set up a new personal pension to receive the death benefits? She just wants the income to continue exactly as before.

I presume she would need still to fill out a pension death benefit form to cover the case that she dies and the fund still has value(?).

Thanks!

dunstonh

She is happy with the draw down/pension as is and asked for it to be left where it is. The adviser has now sent forms requesting to set up a new personal pension plan and open a portfolio for her (this is a transact product) and authorising the the payment of 3% to set this up and 1% a year there after to administer it.

Get an IFA involved and not this FA. Moving the plan internally with the same provider on a servicing arrangement shouldn't cost any new amount. Charging 3% on top of servicing is a disgrace.

How old was the father in law at point of death? (looking for before 75 or over 75 as rules are different either side of that).

Does her financial adviser need to set up a new pension or can we just talk to the administrators to pay her instead?

Transact deal via intermediaries.

Or is it necessary to set up a new personal pension to receive the death benefits? She just wants the income to continue exactly as before.

under 75 you would normally take the money tax free. Over 75 you may take some but you would likely leave it in a pension to avoid unnecessary tax.

If the FA in question is tied to a company then they need to be dumped and an IFA used instead. It is possible to DIY as well but the choice should be DIY or use an IFA. Use of an FA should be avoided.

ctrob67

Thanks for the quick response.

He had just turned 75 and we're aware of the tax consequences. She doesn't want to take the money out, just leave it as is.

I understand he was an FA that worked through Transact but now works for a wealth management company, hence wanting to move the asset there.

My question remains about the 'death benefits': the definition we were given with the form states that the beneficiary of the fund (on death) can receive the benefit as a draw down (or a lump sum). This means to me that she would receive the draw down out of the existing fund without the need to set up another.

My financial affairs have been static for the last 20 years or so (having not heard a peep out of any adviser after the initial marketing of other financial products), so how would I find an IFA that is, preferably, familiar with Transact.

dunstonh

He had just turned 75 and we're aware of the tax consequences. She doesn't want to take the money out, just leave it as is.

In which case, to avoid tax, the pension would be transferred to one in her name.

I understand he was an FA that worked through Transact but now works for a wealth management company, hence wanting to move the asset there.

Transact is a platform that is available to IFAs and whole of market advisers. Software wise, its not a bad platform. Not cheap (although prices are better today than a few years ago). Visually easy to use which can be important for an older investor with low internet skills.

My question remains about the 'death benefits': the definition we were given with the form states that the beneficiary of the fund (on death) can receive the benefit as a draw down (or a lump sum). This means to me that she would receive the draw down out of the existing fund without the need to set up another.

Pensions are a personal thing that is controlled under your own NI number. On death, it needs to be transferred into her name and she has the choice of a new pension or transfer into an existing pension, if she already has one and they accept transfers.
Transact to Transact would be the easiest and would involve little work by an adviser. The ongoing servicing fee is exactly what this sort of thing is meant to cover.

so how would I find an IFA that is, preferably, familiar with Transact.

All IFAs can use Transact. As long as its a not a boutique IFA firm and is a general IFA, then they should be able to do it.

It may be worth asking Transact if they have been paying ongoing servicing fees to an adviser firm. Whilst that FA may have left his old firm, if they have continued to receive an ongoing servicing fee, then they are being paid to service. So, they should either provide that service or refund the fees.

ctrob67

Thanks again,

I have made contact with Transact directly and have remembered a 'friendly' local IFA we know so I will see what they say.