Passing a pension pot on after death

Zolablue

Hi, I'm not currently in the situation where I am imminently going to retire but, I guess, I'm not that far away.
I believe that, should I die, my pension pot can be passed on and that there are some tax implications if I am over 70.
I was watching the ML bit about putting your pension pot in to an annuity or drawdown for potential tax benefits and that raised a question in my head. As I understand it few, if any, annuities can be passed on after death. I believe that some allow you to do this at a reduced level but your annuity payments will be reduced. What is the situation with drawdown? Are you able to pass on any funds left or do they disappear like with a regular annuity?
Thanks

dunstonh

I believe that, should I die, my pension pot can be passed on and that there are some tax implications if I am over 70.

75 not 70.

As I understand it few, if any, annuities can be passed on after death.

Not quite correct.    Pre to 2015, death benefit options on annuities was limited by legislation. Typically limited to 5 or 10 years payments worth and for the rest of the life of a spouse.   However, the pension freedoms opened up the range of death benefits available on annuities for any arranged after that point.   

What is the situation with drawdown?

Remaining fund value is paid out.   

TVAS

Occupational Schemes
First of all you have not told us what type of pension scheme you are a member of. So in an occupational scheme final salary or money purchase they will provide for a spouse pension to continue at half or two thirds of your pension at the date of death.

Flexible Drawdown and Personal Pension.
Have you heard of Google?
https://www.aegon.co.uk/support/faq/pension-technical/death-benefits.html#:~:text=sum death benefit.-,Beneficiary's flexi-access drawdown,of the member's death, or

In all cases ensure you complete an expression of wish to nominate your beneficiaries. However if you nominate a niece and you are married at date  of death the trustees will probably cede any funds under a personal pension of which drawdown is one of them to your spouse rather than your niece.

Whilst you are here ensure previous insurance companies, employers and any entity that hold a financial product of which pensions are one of them for you have your current address. 

Croeso69

TVAS said:

Occupational Schemes
First of all you have not told us what type of pension scheme you are a member of. So in an occupational scheme final salary or money purchase they will provide for a spouse pension to continue at half or two thirds of your pension at the date of death.

Not in a money purchase scheme - these would pay out the accrued fund (plus there may also be a salary-related lump sum death benefit payable on top). 

Zolablue

Thank you everyone. You have been most helpful
TVAS - yes, I have heard of Google and find it very helpful if I can put the correct search question in. Sometimes though, I don't know enough about a subject that I can put in a simple question that the Google search engine will be able to throw out useful results. Also, I am in a defined contribution scheme - I assume that is the same thing as a money purchase scheme (maybe I should Google just to make sure)

Thanks again for the help received.

xylophone

Hi, I'm not currently in the situation where I am imminently going to retire but, I guess, I'm not that far away.

How old are you?

To help with your retirement planning, have you obtained a State Pension Forecast?

https://www.gov.uk/check-state-pension

You mention that you are in a Defined Contribution (aka Money Purchase) Pension Scheme.

https://www.which.co.uk/money/pensions-and-retirement/company-pensions/defined-contribution-and-money-purchase-schemes-afwxr8w31qq3

What information has been provided to you by the administrator of your scheme about how benefits may be taken?

Zolablue

xylophone said:

Hi, I'm not currently in the situation where I am imminently going to retire but, I guess, I'm not that far away.

How old are you?

To help with your retirement planning, have you obtained a State Pension Forecast?

https://www.gov.uk/check-state-pension

You mention that you are in a Defined Contribution (aka Money Purchase) Pension Scheme.

https://www.which.co.uk/money/pensions-and-retirement/company-pensions/defined-contribution-and-money-purchase-schemes-afwxr8w31qq3

What information has been provided to you by the administrator of your scheme about how benefits may be taken?

Hi Xylophone. Thank you for getting involved.

I am 54. I have checked my state pension forecast and it appears that I will qualify for a full state pension if I put in 4 more years NI contributions - hopefully I will be able to do that via continued employment. 

I currently have a number of small pension pots. I have one pension that is already paying out an annuity to me of around £70 a month. I have one old Scottish Widows pension that I took out when I was quite young but, foolishly, stopped paying in to it. It is only worth around £10k but it has an Guaranteed Annuity Rate of 9%.

In addition, I have a small pot in a fund run by an ex-employer (defined contribution) and a reasonable sum in a SERPS opt -out scheme. I have no idea what either of those say I can do with the funds. I guess that's the first place to enquire. I was under the (obviously mistaken) belief that these were just money pots akin to a Personal Pension Plan. I am currently paying in to my Workplace Pension that my employer has set up with The People's Pension

xylophone

I have one old Scottish Widows pension that I took out when I was quite young but, foolishly, stopped paying in to it. It is only worth around £10k but it has an Guaranteed Annuity Rate of 9%.

The GAR is a safeguarded benefit  -  https://adviser.royallondon.com/technical-central/pensions/transfers/safeguarded-benefits/ explains about the circumstances when advice would be required  but note especially

An individual doesn't need to take financial advice where their benefits under the scheme are valued at £30,000 or less. Providers may not accept non-advised transfers of safeguarded benefits so you should check before submitting any transfer applications. 

You might regard this plan as a valuable part of your retirement provision.

In addition, I have a small pot in a fund run by an ex-employer (defined contribution) and a reasonable sum in a SERPS opt -out scheme. I have no idea what either of those say I can do with the funds. I guess that's the first place to enquire. 

 Yes, check with the providers. These are DC schemes but as they appear to be old plans, it is possible, (even likely) that they would not offer the flexibility offered by a modern plan.

 You could need to transfer to a modern plan if, (for example), you wanted to go into drawdown.

You could seek an interview with Pension Wise just to discuss options 

https://www.pensionwise.gov.uk/en

If you wanted personalised advice specific to your situation, you could consult an Independent Financial Adviser.
https://adviserbook.co.uk/

xylophone

https://www.moneyadviceservice.org.uk/en/articles/what-to-do-about-someones-pension-when-theyve-died
may be worth a read.

Have the providers of your schemes asked you to complete a  nomination form?

https://techzone.adviserzone.com/anon/public/pensions/death-benefit-nominations#:~:text=A nomination form (or a,like to benefit on death.&text=They will complete their own,death and use their discretion.

Zolablue

The Scottish Widows fund is only worth about £10K but I was figuring that it is best to keep that one as it is and go for the GAR at 9% as I won't be able to get anything better. 

I know I had to complete a nomination form for the more recent funds - not too sure about the older ones as I can't remember that far back!

Thanks again for all of your assistance. What I thought was relatively straightforward question has opened up a whole can of worms that will require a lot of investigation!

elouise01582

Take care in relation to your Scottish Widows plan on two fronts.  First of all these older pension plans known as retirement annuity contracts are not in trust like more modern pensions so are inside your Estate for inheritance tax purposes so you might want to ask Scottish Widows if you can place it in trust - this is similar to nominating beneficiaries.  Secondly Scottish Widows offer their guaranteed annuity rates (GARs) on the selected retirement date only so make sure you have completed all their paperwork in good time if you choose to claim it.