What to enter as pension value on will

Troy_af

I am in the process of applying for a will for the first time. There is a form where you need to list everything that makes up your estate. 

The list also includes a pension, but all it asks for is a value. I’m not sure what to enter for this. I have served in the military for 9 years, so I will have a pension, but I don’t know what to enter as a cash value - which is what it appears to be asking for. 

Also, having done a little research, apparently, a pension is not covered by a will, so I’m not really sure why it’s on there.

Thanks for any help.

user1977

I would expect your pension administrators can tell you the capital value, don't you get at least annual updates? (I have a final salary pension from a previous job and they advise what it's worth if I wanted to transfer it).

pjs493

They may want to have a general idea in case a value of any private pension you may have needs to become part of the estate (eg you die without a named beneficiary or a spouse or children who would automatically be eligible for it where it would be received outside of your estate).

You also may need to consider your death in service benefit. If you die in service and this doesn't go to a spouse or child it becomes part of the estate and would not be a tax free lump sum (in the case of it going to a spouse for example) so would be paid out to your estate and could tip you over the IHT limits.

You should receive an annual statement giving your projections relating to your Armed Forces pension. Figures on that may be helpful, for example the lump sum you can take upon retirement, etc. It might be worth calling Veterans UK for some advice on this. Also make sure you update JPA to name your beneficiary(ies). My husband died in service and hadn't named a beneficiary, it was straightforward and didn't cause any issues because we were married, but I know it can cause problems for unmarried SP and for those who have only been married a short time.

Keep_pedalling

Please don’t use some on line will service, use a local solicitor to make you will. This is one of the most important documents you will make in your life and is not something to penny pinch on. Saving a few quid now could cost your beneficiaries a fortune if you get it wrong.

Pensions normally fall outside your estate and therefore cannot be included in your will.

buddy9

As KP says, use a solicitor.

SiliconChip

Unless you're likely to die imminently I don't see much point in specifying the value of anything in your Will because that value could easily change between making the Will and it being used. Which is probably why @Keep_pedalling suspects you're trying to use something other than a solicitor to create the Will, which as advised is a false economy.

Marcon

pjs493 said:

They may want to have a general idea in case a value of any private pension you may have needs to become part of the estate (eg you die without a named beneficiary or a spouse or children who would automatically be eligible for it where it would be received outside of your estate).

You also may need to consider your death in service benefit. If you die in service and this doesn't go to a spouse or child it becomes part of the estate and would not be a tax free lump sum (in the case of it going to a spouse for example) so would be paid out to your estate and could tip you over the IHT limits.

That's an extremely common misunderstanding, and one which is oft repeated on this forum.

The crucial point is whether or not pensions and/or DIS lump sum are paid at the discretion of the trustees or managers. If a discretionary decision is made to pay it to the estate, it remains outside the estate for the purpose of IHT.

If the payment is made under some sort of binding nomination made by the person who has died, it is potentially subject to IHT because the payment isn't being made on a discretionary basis.

If under the rules of a particular pension or DIS scheme the absence of a valid expression of wish (aka nomination) form means that the cash will definitely be paid to the estate, then it will potentially be subject to IHT, because the payment to the estate isn't a discretion; it's a requirement under the rules of that particular scheme.

There is rarely a requirement that a DIS benefit can only be paid to a surviving partner and/or children. Again, it's a case of checking the rules (which are normally set out on the expression of wish form issued by the scheme/employer) to see who the permitted classes of beneficiary are. It's common for any blood relative to be permitted; ditto step/adopted children; charities; and often there's a 'catch all' clause along the lines of 'anyone named on a valid expression of wish form'.

The above comments apply to virtually all private sector, and some public sector, schemes, but as always, it's a case of ensuring you know the rules of the scheme in question.

user1977

SiliconChip said:

Unless you're likely to die imminently I don't see much point in specifying the value of anything in your Will because that value could easily change between making the Will and it being used.

I don't think the plan is to specify any values in the Will, I expect this is just some fact-finding to get an idea of what the OP's estate comprises.

pjs493

SiliconChip said:

Unless you're likely to die imminently I don't see much point in specifying the value of anything in your Will because that value could easily change between making the Will and it being used. Which is probably why @Keep_pedalling suspects you're trying to use something other than a solicitor to create the Will, which as advised is a false economy.

To be fair to the OP, I had a meeting with a solicitor earlier this week to update my will following the death of my husband last year. The solicitor did ask me for a number of figures so he could work out roughly what my estate was worth to consider whether IHT would be due on my estate and talked me through this. He didn't need the figures to put in the Will itself, just to get a general idea of the value of my estate and talk me through the IHT position I would be in when I die (assuming IHT rules don't change between now and when I die). It could be that they are asking for these figures to work out the rough value of the estate to provide better advice regarding IHT and other issues.

pjs493

Marcon said:

pjs493 said:

They may want to have a general idea in case a value of any private pension you may have needs to become part of the estate (eg you die without a named beneficiary or a spouse or children who would automatically be eligible for it where it would be received outside of your estate).

You also may need to consider your death in service benefit. If you die in service and this doesn't go to a spouse or child it becomes part of the estate and would not be a tax free lump sum (in the case of it going to a spouse for example) so would be paid out to your estate and could tip you over the IHT limits.

That's an extremely common misunderstanding, and one which is oft repeated on this forum.

The crucial point is whether or not pensions and/or DIS lump sum are paid at the discretion of the trustees or managers. If a discretionary decision is made to pay it to the estate, it remains outside the estate for the purpose of IHT.

If the payment is made under some sort of binding nomination made by the person who has died, it is potentially subject to IHT because the payment isn't being made on a discretionary basis.

If under the rules of a particular pension or DIS scheme the absence of a valid expression of wish (aka nomination) form means that the cash will definitely be paid to the estate, then it will potentially be subject to IHT, because the payment to the estate isn't a discretion; it's a requirement under the rules of that particular scheme.

There is rarely a requirement that a DIS benefit can only be paid to a surviving partner and/or children. Again, it's a case of checking the rules (which are normally set out on the expression of wish form issued by the scheme/employer) to see who the permitted classes of beneficiary are. It's common for any blood relative to be permitted; ditto step/adopted children; charities; and often there's a 'catch all' clause along the lines of 'anyone named on a valid expression of wish form'.

The above comments apply to virtually all private sector, and some public sector, schemes, but as always, it's a case of ensuring you know the rules of the scheme in question.

I was talking specifically about my knowledge of Armed Forces pensions and my recent experiences of this as the beneficiary of an Armed Forces Pension Scheme (more specifically two because my husband fell into both AFPS05 and AFPS15). The AFPS is quite specific about who the death in service benefit can be paid to tax free, otherwise it is given to the estate and would therefore fall in with any other assets. Other pension schemes may well be different but the OP specifically mentioned that they had an Armed Forces pension. 

The information I was given both by a representative of Veterans UK shortly after my husband died, and subsequently in a fact sheet I was given, was that only a spouse or dependant children (specifically those with the service person listed as a parent on the birth certificate - so no step-children or unmarried partners) could benefit from an Armed Forces pension. The beneficiaries have to be financially dependant (or co-dependant in the case of a spouse) to benefit (eg adult children don't get anything). I had to produce my original marriage certificate and original birth certificates for our children before we could be considered beneficiaries, despite my husband's employment record (JPA) listing me as his wife and naming our dependant children.

If I had predeceased my husband, the death in service benefit would have been shared between our children. They get a pension annuity until they finish formal education or reach 23 (whichever is sooner) and I get one for life. If he had died without a spouse or children, no one would receive an annuity and the death in service benefit would have been paid to his estate to be distributed accordingly (in my husband's case this would have been to his nieces and nephews as per his Will, they would not have been able to receive the death in service benefit tax free, it would have become part of his estate and distributed that way).

Marcon

pjs493 said:

Marcon said:

pjs493 said:

They may want to have a general idea in case a value of any private pension you may have needs to become part of the estate (eg you die without a named beneficiary or a spouse or children who would automatically be eligible for it where it would be received outside of your estate).

You also may need to consider your death in service benefit. If you die in service and this doesn't go to a spouse or child it becomes part of the estate and would not be a tax free lump sum (in the case of it going to a spouse for example) so would be paid out to your estate and could tip you over the IHT limits.

That's an extremely common misunderstanding, and one which is oft repeated on this forum.

The crucial point is whether or not pensions and/or DIS lump sum are paid at the discretion of the trustees or managers. If a discretionary decision is made to pay it to the estate, it remains outside the estate for the purpose of IHT.

If the payment is made under some sort of binding nomination made by the person who has died, it is potentially subject to IHT because the payment isn't being made on a discretionary basis.

If under the rules of a particular pension or DIS scheme the absence of a valid expression of wish (aka nomination) form means that the cash will definitely be paid to the estate, then it will potentially be subject to IHT, because the payment to the estate isn't a discretion; it's a requirement under the rules of that particular scheme.

There is rarely a requirement that a DIS benefit can only be paid to a surviving partner and/or children. Again, it's a case of checking the rules (which are normally set out on the expression of wish form issued by the scheme/employer) to see who the permitted classes of beneficiary are. It's common for any blood relative to be permitted; ditto step/adopted children; charities; and often there's a 'catch all' clause along the lines of 'anyone named on a valid expression of wish form'.

The above comments apply to virtually all private sector, and some public sector, schemes, but as always, it's a case of ensuring you know the rules of the scheme in question.

I was talking specifically about my knowledge of Armed Forces pensions and my recent experiences of this as the beneficiary of an Armed Forces Pension Scheme (more specifically two because my husband fell into both AFPS05 and AFPS15). The AFPS is quite specific about who the death in service benefit can be paid to tax free, otherwise it is given to the estate and would therefore fall in with any other assets. Other pension schemes may well be different but the OP specifically mentioned that they had an Armed Forces pension. 

The information I was given both by a representative of Veterans UK shortly after my husband died, and subsequently in a fact sheet I was given, was that only a spouse or dependant children (specifically those with the service person listed as a parent on the birth certificate - so no step-children or unmarried partners) could benefit from an Armed Forces pension. The beneficiaries have to be financially dependant (or co-dependant in the case of a spouse) to benefit (eg adult children don't get anything). I had to produce my original marriage certificate and original birth certificates for our children before we could be considered beneficiaries, despite my husband's employment record (JPA) listing me as his wife and naming our dependant children.

If I had predeceased my husband, the death in service benefit would have been shared between our children. They get a pension annuity until they finish formal education or reach 23 (whichever is sooner) and I get one for life. If he had died without a spouse or children, no one would receive an annuity and the death in service benefit would have been paid to his estate to be distributed accordingly (in my husband's case this would have been to his nieces and nephews as per his Will, they would not have been able to receive the death in service benefit tax free, it would have become part of his estate and distributed that way).

It's crucial to say if you are talking about one specific scheme. Don't forget that many people reading this forum won't know that's the case and will take your comments as having a more general application.