Inheritance of a pension

007apm

Martin's comments on the latest show are of concern.  I have a small workplace pension and a much larger SIPP.  I understand that the work place pension is subject to expression of wish (and will probably empty it in to my SIPP once it is worth doing) but surely my SIPP is inheritable?  Please explain.

MX5huggy

All pensions (someone will find an exception but I’ll go with all) are held in trust. This means they don’t form part of your estate and therefore you don’t pay inheritance tax on them. As they aren’t part of your estate they are not covered by a will. The trustees of the pension have the role of determining how the funds are distributed (if they didn’t have this role it would not be a valid trust). 

So an expression of wishes is required for every pension without one the trustees will have to guess what the best outcome. 

If your expression of wishes is straightforward (give it to my wife) then just fill it out as such. If it’s more complicated, give it to my long term partner who I don’t live with, not my legal wife who I’ve not bothered to divorce. Then include a letter of explanation in with the expression of wishes. Because at first look that would seem a strange choice. 

Kim1965

What happens without an expression of wish? 

tacpot12

Kim1965 said:

What happens without an expression of wish? 

The Trustees would make enquiries about the member's family and use their discretion to make payments to the people that they thought should inherit the pension. 

Silvertabby

Kim1965 said:

What happens without an expression of wish? 

Then the pension lump sum is paid at the Trustee's discretion. (Survivor's ongoing pensions are subject to scheme rules and eligibility).

If married, then the spouse is usually the automatic default - but note that different schemes have different views on married but separated.

Then children, parents, siblings.

The nuclear option would be to pay any monies to the estate/executor.  In 20 years LGPS experience, I've only known that happen twice - similar cases, in which the nearest relations were a large number of cousins/children of deceased cousins, with new claims popping up almost every day.....

Albermarle

007apm said:

Martin's comments on the latest show are of concern.  I have a small workplace pension and a much larger SIPP.  I understand that the work place pension is subject to expression of wish (and will probably empty it in to my SIPP once it is worth doing) but surely my SIPP is inheritable?  Please explain.

In legal terms ( with regard to inheritance/expression of wish  etc ) your workplace pension and your SIPP are identical.
Sometimes Martins snappy TV presentations/interviews can be misleading on the details.

Kim1965

tacpot12 said:

Kim1965 said:

What happens without an expression of wish? 

The Trustees would make enquiries about the member's family and use their discretion to make payments to the people that they thought should inherit the pension. 

Would the trutees ask for probate in an uncomplicated case? 

lisyloo

Kim1965 said:

tacpot12 said:

Kim1965 said:

What happens without an expression of wish? 

The Trustees would make enquiries about the member's family and use their discretion to make payments to the people that they thought should inherit the pension. 

Would the trutees ask for probate in an uncomplicated case? 

I believe the answer is no because it's not part of the estate and probate is for estates.
However of course they will ask for proof of ID, address and relationship e.g. marriage certificate.

dunstonh

Martin's comments on the latest show are of concern. 

What did he say this time?

  I have a small workplace pension and a much larger SIPP.  I understand that the work place pension is subject to expression of wish (and will probably empty it in to my SIPP once it is worth doing) but surely my SIPP is inheritable? 

Defined contribution pensions are paid to your nominated beneficiaries. They can choose whether to take it as a lump sum or leave it as a pension.   There are some variations around how you can nominate beneficiaries with more advanced pensions (such as SIPPs).

Would the trutees ask for probate in an uncomplicated case? 

Probate doesnt apply to pensions in most cases.   However, sometimes trustees will ask to see a copy of the Will to see if the wishes on the EoW are similar to the Will (usually in cases or remarriage or birth of more children etc).

Pat38493

Albermarle said:

007apm said:

Martin's comments on the latest show are of concern.  I have a small workplace pension and a much larger SIPP.  I understand that the work place pension is subject to expression of wish (and will probably empty it in to my SIPP once it is worth doing) but surely my SIPP is inheritable?  Please explain.

In legal terms ( with regard to inheritance/expression of wish  etc ) your workplace pension and your SIPP are identical.
Sometimes Martins snappy TV presentations/interviews can be misleading on the details.

Right but in in terms of the question from the OP, if they have several different pensions, SIPPS and/or DB or whatever, they probably need to fill out a nomination form for each of them?  This is what I had to do with my pensions and this was my confusion as well - I assumed that one nomination form would cover my current and legacy employer pensions but I found out that I have to fill out separate forms for each.

OP - SIPP pensions are not part of your estate - they are a pension and as such are subject to a nomination form rather than whatever it says in your will.  Even SIPP pensions are technically in a trust I think.

Albermarle

All pensions are held in trust AFAIK ( maybe some unusual special cases ?)
For a DB one ( or an annuity)  the terms of the scheme will determine where any pension goes on death of the pensioner. Typically a % will go to a spouse. So an annual pension income that is a proportion of what the dead person was getting ( typically 50%) . If the spouse is also dead, then there maybe some provision for dependent children under 18. But apart from that , the pension will just end. So in theory you do not have to nominate someone as the scheme rules will take priority, although I think they do still ask you to do so. However if you nominate a cousin or friend they still will not get anything.

For a DC one, you can nominate who you like to inherit any pension pot left, but the Trustees have the final say. So for example if you did not nominate your spouse or children, they will probably want to investigate before agreeing to any payout.