What happens on death?

IAMIAM

I am updating my mortgage etc this month and wondered if people can shed light on what actually happens on death if next of kins are siblings vs partner/children.
1. Mortgage/House
2. Level Life Insurance with CIC
3. Income Protection
4. Civil Service Pension with Life Cover & Old Pension Schemes  
5. General Assets (Car etc)
Do any of these need to go into trust? 
Will it all just go into a pot of money and get split between siblings? (Ideally what I would like)
What are the tax implications if no will? Does it matter?

JoeCrystal

What does your own research say? You really should have a will drawn up as well.
Each point you mentioned above can or may or will be dealt with depending on the terms and conditions as well as your will.

IAMIAM

I do have a will (the online one from Which), however, I wanted to check from maybe people who have experienced this kind situation. The one thing I have found is that the DPB seems to die with the beneficiary, which I am astonished by. You could potentially have built 30 years worth of pension, claim maybe a years worth then pass away and so does the pension OR pass away before claiming and the pension also dies with you. If I am reading it right. 

eskbanker

A DB pension pays out for the rest of your life after being started, whether that's 50 days or 50 years.  If you have reason to believe you'll have a shortened life and want a pot to pass on to inheritors you'd need to transfer it to a DC scheme....

Albermarle

IAMIAM said:

I do have a will (the online one from Which), however, I wanted to check from maybe people who have experienced this kind situation. The one thing I have found is that the DPB seems to die with the beneficiary, which I am astonished by. You could potentially have built 30 years worth of pension, claim maybe a years worth then pass away and so does the pension OR pass away before claiming and the pension also dies with you. If I am reading it right. 

Not sure why you are astonished as it has always been the same . In a DB scheme the ones who die early , help to fund the ones who live to a ripe old age .
In reality if you die before the pension is due or just after , there will still be some payouts , depending on the scheme rules.
Also typically for a DB scheme the pensioner has only paid in themselves  a minor fraction of the cost of the scheme.
If instead he was in a DC scheme, he would have had to have paid in a large % of his salary to be able to draw a similar income , although if he died early then in this case there would be money left for his heirs.

LHW99

My understanding would be:

1) House sold, redeem mortgage and residue goes for dividing up

2) If in term, life insurance pays out on death, probably to the estate

3) Income protection cuts in if you are sick before passing on, if it is still being paid for, and the T&C's are met but stops on death

4) DB pensions pay a lump sum (usually) and an income for life. A few may have a guaranteed "x years" remainder of which would be paid to the estate.

5) Assets would be valued / monetised and the value put in the estate.

Executor(s) then divide up what there is according to the will.

You would need to check the exact terms of the insurances / pension to know.

Albermarle

For Point 4) if there was anything to pay , I think it would go to the nominated beneficiary or spouse directly rather than into the estate . For sure that is what happens with DC pensions.

Marcon

Albermarle said:

For Point 4) if there was anything to pay , I think it would go to the nominated beneficiary or spouse directly rather than into the estate . For sure that is what happens with DC pensions.

Any guarantee period payments will 'go' to whoever the trustees decide they should go to - hence the importance of ensuring the member has an up to date Expression of Wish (aka Nomination) Form.

IAMIAM said:

I am updating my mortgage etc this month and wondered if people can shed light on what actually happens on death if next of kins are siblings vs partner/children.
Will it all just go into a pot of money and get split between siblings? (Ideally what I would like)

If that's what you'd like, why not write a simple will to that effect? If you die intestate, that won't be what happens - your children will inherit, not your siblings; and of course your partner might make a claim against the estate if you leave them nothing...

hugheskevi

IAMIAM said:

I do have a will (the online one from Which), however, I wanted to check from maybe people who have experienced this kind situation. The one thing I have found is that the DPB seems to die with the beneficiary, which I am astonished by. You could potentially have built 30 years worth of pension, claim maybe a years worth then pass away and so does the pension OR pass away before claiming and the pension also dies with you. If I am reading it right. 

For Civil Service (and describing the post 2015 scheme), you have 3 different things on death:

(1) Death in service lump sum - applies if you die whilst employed and an active member of the pension scheme. For alpha members, this is the greater of 2 x salary or 5 x annual rate of accrued pension (higher if previously a premium or classic plus member). Paid to nominated beneficiary.

(2) 5 year guarantee lump sum - for deferred and pensioner members, if you die without having received 5 years of pension, a lump sum of 5 x annual rate of accrued pension less payments already made (if any) is paid as a lump sum. Paid to nominated beneficiary.

(3) Ongoing survivor pension to partners and dependents, which are enhanced if you die in employment whilst a member of the pension scheme.

So the only way the pension dies with you is if you die with no partner or dependents having received the pension for at least 5 years.

The accrual rate is 2.32% p/a of pensionable earnings, so with a 5 year guarantee that means a minimum of 11.6% of pensionable earnings is paid out. The highest member contribution rate paid is 7.35% (ignoring the 8.05% rate paid by only those earning £150K+) so members get back more than they contributed even in the worst-case scenario of death occurring as a deferred member with no partner or dependents.

Aretnap

IAMIAM said:

The one thing I have found is that the DPB seems to die with the beneficiary, which I am astonished by. You could potentially have built 30 years worth of pension, claim maybe a years worth then pass away and so does the pension OR pass away before claiming and the pension also dies with you. If I am reading it right. 

You can't build up 30 years worth of DB pension - that's not how they work. You build up a monthly amount which you get paid for the rest of your life, whether you die shortly after you retire, or whether you live to be a hundred. This makes a DB pension extremely valuable for most people - it gives them certainty and means they never have to worry about running out of money in retirement. 

If people talk about "30 years of pension" it's because your length of service affects the monthly amount. If you've worked for an organisation for a year or two your pension will only be a few quid a month; if you've worked for them for 30 years it will be quite a lot. But either way it will be paid until you die, not for a set period (after which presumably you would be stuffed).

In practice many schemes include a promise to keep paying for at least 5 years after you retire, or a lump sum if you die before or shortly after retirement, in order to avoid headlines of the type "My dad died the day after he retired and now I don't get any cash, says well off middle aged person". But in general they way they work is that the pensions of people who live to be a hundred are subsidised by those of people who die soon after retirement - as well as being heavily subsidised by the organisation they worked for. Which is as it should be. Your pension is there primarily for your benefit, and to a lesser extent the benefit of your spouse and any dependant children you have. Not for the benefit of grown up children, siblings or more distant relatives. 

kidmugsy

Aretnap said: ... the way they work is that the pensions of people who live to be a hundred are subsidised by those of people who die soon after retirement ...

Exactly right: and it's worth doing because few of us have any objective reason to know which group we will fall into.