Selling DB partner benefit

zagfles

michaels said:

zagfles said:

michaels said:

I'm thinking someone with a generous db without a partner close to death decides to enter into a civil partnership with someone much younger in return for a one of payment of say £100k which they could bequeath to their children which would in turn grant the purchaser/partner a 50% annuity for life that would otherwise expire on the pensioners death.

Fake marriages/CPs could be used for all sorts of scams. immigration, IHT dodges etc, which is why the authorities are wise to them. Just as fake separations could be used for other scams like benefit fraud, pensions LTA splitting etc.

Beside which, as well as being a indicator of a possible scam, most schemes will actuarily reduce the spouse benefit if the spouse is much younger.

What makes it a scam though?  Are there wordings in the pension contract around what makes a civil partnership 'real' rather than for convenience and that rule out the latter for partner benefits?

If it were legal to marry/form a CP for convenience, people would do it for immigration, IHT avoidance etc. Loads is written about avoiding IHT and there are lots of firms that help people mitigate IHT. Have you heard of any that (eg) suggest marrying/forming a CP with your son/daughter's partner as a way of passing your inhertiance to them tax free?

michaels

zagfles said:

michaels said:

zagfles said:

michaels said:

I'm thinking someone with a generous db without a partner close to death decides to enter into a civil partnership with someone much younger in return for a one of payment of say £100k which they could bequeath to their children which would in turn grant the purchaser/partner a 50% annuity for life that would otherwise expire on the pensioners death.

Fake marriages/CPs could be used for all sorts of scams. immigration, IHT dodges etc, which is why the authorities are wise to them. Just as fake separations could be used for other scams like benefit fraud, pensions LTA splitting etc.

Beside which, as well as being a indicator of a possible scam, most schemes will actuarily reduce the spouse benefit if the spouse is much younger.

What makes it a scam though?  Are there wordings in the pension contract around what makes a civil partnership 'real' rather than for convenience and that rule out the latter for partner benefits?

If it were legal to marry/form a CP for convenience, people would do it for immigration, IHT avoidance etc. Loads is written about avoiding IHT and there are lots of firms that help people mitigate IHT. Have you heard of any that (eg) suggest marrying/forming a CP with your son/daughter's partner as a way of passing your inhertiance to them tax free?

But that is about tax evasion where there are general 'anti evasion' laws in the statutes.  Any agreement with a pension company is a civil agreement between an individual and a company so presumably very different laws apply.  Govt pensions may have another set of rules again.

Silvertabby

May not apply to all schemes, but certainly the Armed Forces pension scheme will only pay out in the event of a death bed marriage if the claimant can prove that they were living together,  as a couple, for at least 2 years. 

Other schemes MAY be more lenient, but someone daft/desperate enough to go through with this is hardly likely to have £100K knocking about.

zagfles

michaels said:

zagfles said:

michaels said:

zagfles said:

michaels said:

I'm thinking someone with a generous db without a partner close to death decides to enter into a civil partnership with someone much younger in return for a one of payment of say £100k which they could bequeath to their children which would in turn grant the purchaser/partner a 50% annuity for life that would otherwise expire on the pensioners death.

Fake marriages/CPs could be used for all sorts of scams. immigration, IHT dodges etc, which is why the authorities are wise to them. Just as fake separations could be used for other scams like benefit fraud, pensions LTA splitting etc.

Beside which, as well as being a indicator of a possible scam, most schemes will actuarily reduce the spouse benefit if the spouse is much younger.

What makes it a scam though?  Are there wordings in the pension contract around what makes a civil partnership 'real' rather than for convenience and that rule out the latter for partner benefits?

If it were legal to marry/form a CP for convenience, people would do it for immigration, IHT avoidance etc. Loads is written about avoiding IHT and there are lots of firms that help people mitigate IHT. Have you heard of any that (eg) suggest marrying/forming a CP with your son/daughter's partner as a way of passing your inhertiance to them tax free?

But that is about tax evasion where there are general 'anti evasion' laws in the statutes.  Any agreement with a pension company is a civil agreement between an individual and a company so presumably very different laws apply.  Govt pensions may have another set of rules again.

It would be fine to get married to save tax, the marriage allowance encourages it, also to avoid IHT, provided it's a genuine marriage, eg a couple who've been together for years but not bothered tying the knot.

So it's not getting married to avoid tax that's the issue, it's if the marriage is fake that's the issue. I'm sure the same would apply whether the fake marriage was for for the purposes of defrauding the taxman, the immigration rules, or a pension company. But I'm not a legal expert. However if it were a legal loophole you can be sure there'd be advisers and accountants recommending it - they don't seem to be, not openly anyway.

Thrugelmir

michaels said:

zagfles said:

michaels said:

I'm thinking someone with a generous db without a partner close to death decides to enter into a civil partnership with someone much younger in return for a one of payment of say £100k which they could bequeath to their children which would in turn grant the purchaser/partner a 50% annuity for life that would otherwise expire on the pensioners death.

Fake marriages/CPs could be used for all sorts of scams. immigration, IHT dodges etc, which is why the authorities are wise to them. Just as fake separations could be used for other scams like benefit fraud, pensions LTA splitting etc.

Beside which, as well as being a indicator of a possible scam, most schemes will actuarily reduce the spouse benefit if the spouse is much younger.

What makes it a scam though?  Are there wordings in the pension contract around what makes a civil partnership 'real' rather than for convenience and that rule out the latter for partner benefits?

Trustees aren't bound by the nomination form. They will make their own enquiries following the death of the scheme member and use their own discretion. 

hugheskevi

Silvertabby said:

May not apply to all schemes, but certainly the Armed Forces pension scheme will only pay out in the event of a death bed marriage if the claimant can prove that they were living together,  as a couple, for at least 2 years. 

Other schemes MAY be more lenient, but someone daft/desperate enough to go through with this is hardly likely to have £100K knocking about.

Civil Service rules permit scheme manager to withhold survivor pension where the member dies within 6 months of marriage/Civil Partnership.

The survivor pension will be reduced if age disparity is more than 12 years, down to a minimum of 50% of standard survivor benefit where the age disparity is 32+ years. The standard survivor pension is 37.5%, so that would be a bit under 20% of original pension. I suspect this is the biggest consideration - after years of being in payment and only going up by inflation, even fairly large pensions wouldn't provide very large survivor pensions to justify the trouble and risk.

Marcon

michaels said:

zagfles said:

michaels said:

I'm thinking someone with a generous db without a partner close to death decides to enter into a civil partnership with someone much younger in return for a one of payment of say £100k which they could bequeath to their children which would in turn grant the purchaser/partner a 50% annuity for life that would otherwise expire on the pensioners death.

Fake marriages/CPs could be used for all sorts of scams. immigration, IHT dodges etc, which is why the authorities are wise to them. Just as fake separations could be used for other scams like benefit fraud, pensions LTA splitting etc.

Beside which, as well as being a indicator of a possible scam, most schemes will actuarily reduce the spouse benefit if the spouse is much younger.

What makes it a scam though?  Are there wordings in the pension contract around what makes a civil partnership 'real' rather than for convenience and that rule out the latter for partner benefits?

You're confusing trust law (which is what DB schemes are established under) with contract law. There are various safeguards in trust deeds to minimise the risk of just this sort of thing - as others have already outlined.