Does a pension without a nominated beneficiary form part of estate?

Clairre40

Hi, I'm hoping you'll be able to help me.

I'm currently dealing with the finances of someone who passed away. He was under pension age and had no assets other than a couple of small private pensions. He had a small Sky debt of less than £65.

My understanding was that the pensions did not form part of the estate, but Sky have advised me that this is only the case if a beneficiary has been nominated and they'll require payment from the pensions if there is no nominated beneficiary.

At this point I don't know whether there is a nominated beneficiary.

Thank you

MarkCarnage

Are these defined benefit or defined contribution pensions? 
If the former, then the Trustees have the discretion to decide who if anyone is entitled to receive a dependant's pension. It's not part of the estate. There may be a small amount of pension either overpaid or underpaid depending on the date of death and date of pension payments. The pension dies with them unless there is a qualifying dependant. 
If it's from a defined contribution fund, then it's not legally part of the estate either but an expression of wish form may direct the pension company to pay the remaining capital to a named beneficiary. If it's an annuity then the pension dies with them.
Not sure that Sky will be a named beneficiary! They will just be a creditor if there are funds available. 

MEM62

In the event that the pension is a defined contribution scheme and there is no EoW, the pension trustees determine where any payout goes.  A defined benefit scheme will be bound by the rules of the scheme.  In any case, the pension does not form part of the deceased estate and Sky have no claim on it.    

LHW99

MEM62 said:

In the event that the pension is a defined contribution scheme and there is no EoW, the pension trustees determine where any payout goes.  A defined benefit scheme will be bound by the rules of the scheme.  In any case, the pension does not form part of the deceased estate and Sky have no claim on it.    

But as MarkCarnage said, as a debt is outstanding, then there is an obligation on the executors to settle that from any funds in the Estate eg bank accounts belonging to the deceased or other sources of money such as insurance policies, once higher level creditors (outstanding tax?) are paid.

Marcon

MEM62 said:

In the event that the pension is a defined contribution scheme and there is no EoW, the pension trustees determine where any payout goes.  A defined benefit scheme will be bound by the rules of the scheme.  In any case, the pension does not form part of the deceased estate and Sky have no claim on it.    

It could, especially if it's a defined contribution scheme, there's no nomination form and the trustees decide, after carrying out appropriate due diligence, to pay the money to the deceased's personal representatives. 

OP - any chance the estate is insolvent? If so, leave well alone and tell any creditors that nobody is administering the estate.

squirrelpie

Clairre40 said:

I'm currently dealing with the finances of someone who passed away. He was under pension age and had no assets other than a couple of small private pensions. He had a small Sky debt of less than £65.

My understanding was that the pensions did not form part of the estate, but Sky have advised me that this is only the case if a beneficiary has been nominated and they'll require payment from the pensions if there is no nominated beneficiary.

I'd suggest copying their letter (get them to write one if it was verbal) to somebody like the editor of the Sunday Times money section. They love this kind of big-company-tries-to-rob-poor-dead-person story.

Clairre40

Thank you so much. I think they're defined contribution schemes and, as the person was in their thirties, the values are quite small. 

There weren't enough assets to cover the funeral. I've offered to pay the debt as it's such as small amount and I want them to go away, but they wouldn't take payment unless I confirmed it was coming from the pensions.

LHW99

Clairre40 said:

Thank you so much. I think they're defined contribution schemes and, as the person was in their thirties, the values are quite small. 

There weren't enough assets to cover the funeral. I've offered to pay the debt as it's such as small amount and I want them to go away, but they wouldn't take payment unless I confirmed it was coming from the pensions.

Any debts come from the estate if there are funds available. If the estate is insolvent then the debt dies with the person. You have no responsibility to pay and shouldn't do so. A basic (and respectful) funeral can still be arranged even if the estate does not have funds to do so - someone here will be able to explain the procedure.

MEM62

@Marcon I have just checked the guidance notes that I was given when I assumed the role of trustee for our company scheme.  There are no scenarios detailed in the guidance that would cause a pension to be drawn into a deceased estate.  In fact, the guidance is very clear that it sits outside it. 

    

Marcon

MEM62 said:

@Marcon I have just checked the guidance notes that I was given when I assumed the role of trustee for our company scheme.  There are no scenarios detailed in the guidance that would cause a pension to be drawn into a deceased estate.  In fact, the guidance is very clear that it sits outside it. 

    

@MEM62

Normally it does, but paying lump sums to the personal representatives is the ultimate fall back if there are no other options open to the trustees. It's a point many people (including advisers) overlook or simply misunderstand largely because it's quite rare. Guidance notes for a novice trustee can't be expected to cover all scenarios!

It is also possible for a member to nominate their personal representatives as the recipient of any lump sum benefits (which can be handy when it comes to paying IHT before assets such as a property can be sold).

Provided the payment is made at the discretion of the trustees, any payment to the estate is still not subject to IHT (even if the estate is at IHT-able levels).

As always, these things are subject to scheme rules as well as HMRC regs.

MEM62

Marcon said:

MEM62 said:

@Marcon I have just checked the guidance notes that I was given when I assumed the role of trustee for our company scheme.  There are no scenarios detailed in the guidance that would cause a pension to be drawn into a deceased estate.  In fact, the guidance is very clear that it sits outside it. 

    

@MEM62

Normally it does, but paying lump sums to the personal representatives is the ultimate fall back if there are no other options open to the trustees. It's a point many people (including advisers) overlook or simply misunderstand largely because it's quite rare. Guidance notes for a novice trustee can't be expected to cover all scenarios!

It is also possible for a member to nominate their personal representatives as the recipient of any lump sum benefits (which can be handy when it comes to paying IHT before assets such as a property can be sold).

Provided the payment is made at the discretion of the trustees, any payment to the estate is still not subject to IHT (even if the estate is at IHT-able levels).

As always, these things are subject to scheme rules as well as HMRC regs.

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