Beneficiaries - "Nominate" v. "Expression of Wish"?

Shylock

NEST state in their guidance that if a Beneficiary is "Nominated" the Pension Pot will "usually" be included in the deceased's estate for IHT purposes.  Whereas if the beneficiary is named as an "Expression of Wish" it will "usually not" be subject to IHT.
I though Pension Pots were outside the Estate either way as they're held in Trust?  If what NEST advise is correct why would you choose to Nominate rather than Express a Wish?  Presumably each method has some pro's & con's?

dunstonh

The problems with being explicit on terminology is that you fail to take into account variations in the use of terminology.   One provider may use the term "nomination of a beneficiary". Another may use the term "expression of wish".  Yet they may do exactly the same thing and have the same rule applied.

The key thing is that if you leave the final decision to the trustees and have just indicated your wishes, then it is outside of the estate.  If you insist on a nomination of the beneficiary that is explicit and not subject to the trustees then it falls within your estate.  The switching of the terminology in this paragraph was intentional to show you cannot rely on name but should be aware of the method.

The vast majority of people will have an expression of wish or nomination of a beneficiary that is subject to trustees decision.     I personally have never placed one that brings it into the estate as it a niche option.  

jamesd

NEST is right in the sense of a nomination that removes trustee discretion.

There are some niche situations where this is best. The dominant one is a pension transfer to a new pension. If death is within two years this is likely to be subject to inheritance tax. The tax can be avoided by nominating a spouse for those two years, then going back to an expression of wishes.

Brynsam

Shylock said:

NEST state in their guidance that if a Beneficiary is "Nominated" the Pension Pot will "usually" be included in the deceased's estate for IHT purposes.  Whereas if the beneficiary is named as an "Expression of Wish" it will "usually not" be subject to IHT.
I though Pension Pots were outside the Estate either way as they're held in Trust?  If what NEST advise is correct why would you choose to Nominate rather than Express a Wish?  Presumably each method has some pro's & con's?

Something which is not well understood is that you can ask for your pension pot to be paid to your estate and it won't be subject to IHT provided that payment is at the discretion of the trustees. This is helpful where, for example, someone wants to ensure their estate has enough cash to pay any IHT due if they know their executors might otherwise struggle to raise cash e.g. where an expensive property could take time to sell.