Royal London nomination of beneficiary

michaeln2

I have a pension with Royal London that i could have taken on my birthday (May this year), but decided to wait until January 2020 when i claim my state pension.


I was unsure what the situation would be if i died before i took my private pension. Would i lose it or would it pass onto my wife.



They sent me a "Payment of benefits on death"form to fill in. The nomination of beneficiary section has 2 options.


"Option 1 – At our discretion (as the scheme administrator)
If you choose this option, you’ll need to tell us who you want us to consider paying the benefits to. In most
circumstances we’ll follow your wishes. However it’s important to understand that under this option we are not
bound to follow your wishes. We may decide to pay your benefits to a different person or persons if your personal
circumstances at the time of your death make this an appropriate course of action. If you choose this option, any
benefits we pay will not be subject to any inheritance tax.
If you choose this option, you can change who you have nominated at any time by writing to us, however, you can’t
choose Option 2 below at a later date". If you have previously chosen this option and told us who you want to
nominate, you’ll only be able to use this form to change who you’ve nominated under Option 1.


"Option 2 – At my direction
If you choose this option, we’re legally obliged to carry out your wishes and pay your benefits to whoever you have directed us
to pay these to. If you choose this option, any benefits we pay may be subject to inheritance tax so you may wish to discuss this
with a financial adviser first.
If you choose this option, you can change who you have directed us to pay the benefits to at any time by writing to us. You can
also change your mind and choose Option 1 at a later date.
Paying benefits on death
When we’re notified of your death, we’ll explain to your beneficiaries the different ways in which the benefits can be paid to them.
If you have a Pension Portfolio plan, including an Income Release or Self Investment pension plan, or a Retirement Solutions
Group Personal Pension or Group Stakeholder Pension plan with Royal London, and you want us to consider giving one or more
of your nominated beneficiaries the option of using the amount available for beneficiary flexi-access drawdown, it’s important
that you tell us this when completing the table below. You should speak to your financial adviser to find out more information
about why you may want to consider this option.
Remember that when you’re choosing your nominations, you can only choose who you want your benefits to be paid to on your
death – you can’t choose who any remaining benefits may be paid to when those beneficiaries subsequently die. "


There is a list of blank fields to enter the names of chosen beneficiaries. Could anyone advise me of which option i should take?
Thank you.

dunstonh

Could anyone advise me of which option i should take?

No. However, they can offer opinion or discussion points. But nothing you read here is advice when it comes to regulated areas.

Most people would fit option 1 but some would have situations where option 2 would be better.

greatkingrat

In practice, if you are married it doesn't really make much difference which option you pick, the money would end up with your wife either way.

The difference would be that if hypothetically you split up in the future, under option 1 the pension company would have the discretion to decide it was no longer appropriate to pay to your (ex) wife, while under option 2 they would have to follow the form regardless.

michaeln2

Thank you for the reply. I realise i worded it wrong in asking for advice....opinions would be welcomed, however.
A little confused about option 1 "at the discretion of the scheme administrator" where it states "Under this option we are not bound to follow your wishes. We may decide to pay your benefits to a different person or persons if your personal circumstances at the time of your death make this an appropriate course of action"

Malthusian

Most people would choose option 1.

The fact that the nomination is not binding is very rarely of any importance. The pension trustees would normally follow your expression of wish unless there was a very obvious reason not to, e.g. you and the person you nominated divorced after making the nomination.

In very few cases would it make sense to subject the benefits to Inheritance Tax. A lot of pension providers don't even offer option 2 (at least not via the standard form) but for whatever reason Royal London think you should have the option of forfeiting the IHT benefits.

I was unsure what the situation would be if i died before i took my private pension. Would i lose it or would it pass onto my wife.

Well technically you (first-person singular) would lose it because you'll be dead. However the pension wouldn't disappear or be snaffled by Royal London. It would generally be inherited by your nominated beneficiary or whoever the trustees pay it to. If you nominate your wife and are still married on your death it is a virtual certainty she will inherit the pension fund in whatever form she prefers.

squirrelpie

Most people would fit option 2 but some would have situations where option 1 would be better.

I don't understand this.


Surely it is better to have the money outside the estate for inheritance tax (i.e. option 1) in most cases. There would need to be a special reason to choose to pay tax on it (i.e. option 2). What am I misunderstanding?

Malthusian

I am fairly certain dunstonh got 1 and 2 the wrong way round.

I had to check which he said because option 1 is so clearly the best option. Except possibly in exam question scenarios that I can't even think of.

Silvertabby

michaeln2 wrote: »

Thank you for the reply. I realise i worded it wrong in asking for advice....opinions would be welcomed, however.
A little confused about option 1 "at the discretion of the scheme administrator" where it states "Under this option we are not bound to follow your wishes. We may decide to pay your benefits to a different person or persons if your personal circumstances at the time of your death make this an appropriate course of action"

This is pretty standard. The primary reason for this, as has already been said, is that 'payment at the trustees discretion' means that it is excluded for IHT purposes.

Also, not everyone ties up their paperwork with a nice tidy bow before they die. There have been some really 'interesting' claims for LGPS death benefits which called for the trustees to make a decision, even some with a completed nomination form on record. Like the chap who nominated his girlfriend when he first joined the LGPS..... Twenty odd years later, married (not the named ex girlfriend) with children, he died in service. In this case, the trustees overruled the (technically valid) nomination form and awarded the lump sum to the widow.

dunstonh

I am fairly certain dunstonh got 1 and 2 the wrong way round.

i did. In most cases, you should leave it to the discretion of the scheme trustees and just give your nomination/express of wish. The other method is niche.

michaeln2

Thank you all. Much appreciated.

Marcon

dunstonh wrote: »

i did. In most cases, you should leave it to the discretion of the scheme trustees and just give your nomination/express of wish. The other method is niche.

The 'other method' is the only one in respect of NEST benefits. No discretions there about what happens to the fund if you die before 'decumulation' as they so charmingly describe it!