Pension beneficiaries under 18

jcarmel

Hello everyone, I am currently expecting my first child and so have looked in to changing my workplace pensions beneficiary to my child (in preparation!). On the MSE page regarding pension beneficiaries, there is a note: "Important: If you nominate someone under age 18, a pension provider will usually only be able to pay out to them if a trust or other suitable arrangement has been set up for them."
My question is, is a Junior ISA savings account classed as a 'suitable arrangement' for a pension provider to pay in to, if I happen to perish before my child turns 18?
Thank you in advance for any help!

p00hsticks

I don't know the answer to your question I'm afraid, but a wider consideration is who you would want to bring up your child if you do 'happen to perish' before they turn 18, and would they then potentially need to be able to access to (some of)  those funds to help pay towards their upbringing (which I think would be permitted by a trust). 

Marcon

jcarmel said:

Hello everyone, I am currently expecting my first child and so have looked in to changing my workplace pensions beneficiary to my child (in preparation!). On the MSE page regarding pension beneficiaries, there is a note: "Important: If you nominate someone under age 18, a pension provider will usually only be able to pay out to them if a trust or other suitable arrangement has been set up for them."
My question is, is a Junior ISA savings account classed as a 'suitable arrangement' for a pension provider to pay in to, if I happen to perish before my child turns 18?
Thank you in advance for any help!

Congratulations - both on your forthcoming parenthood and your level of good sense!

One of the first things you might consider is ensuring you have a valid will covering guardianship arrangements should the entirely awful happen and both parents die in the same car crash...

You don't mention a partner, but if you have one and they are the other parent of the expected child, it might be more sensible to nominate them in the expectation they will use any funds for the benefit of your mutual offspring.

Otherwise nominating someone else to receive funds 'to be used for the benefit of...' is another option. 

jcarmel

p00hsticks said:

I don't know the answer to your question I'm afraid, but a wider consideration is who you would want to bring up your child if you do 'happen to perish' before they turn 18, and would they then potentially need to be able to access to (some of)  those funds to help pay towards their upbringing (which I think would be permitted by a trust). 

Yes I suppose I should really think who it should be if my partner also dies. Then I could put them as the alternative beneficiary. Thanks!

jcarmel

Marcon said:

jcarmel said:

Hello everyone, I am currently expecting my first child and so have looked in to changing my workplace pensions beneficiary to my child (in preparation!). On the MSE page regarding pension beneficiaries, there is a note: "Important: If you nominate someone under age 18, a pension provider will usually only be able to pay out to them if a trust or other suitable arrangement has been set up for them."
My question is, is a Junior ISA savings account classed as a 'suitable arrangement' for a pension provider to pay in to, if I happen to perish before my child turns 18?
Thank you in advance for any help!

Congratulations - both on your forthcoming parenthood and your level of good sense!

One of the first things you might consider is ensuring you have a valid will covering guardianship arrangements should the entirely awful happen and both parents die in the same car crash...

You don't mention a partner, but if you have one and they are the other parent of the expected child, it might be more sensible to nominate them in the expectation they will use any funds for the benefit of your mutual offspring.

Otherwise nominating someone else to receive funds 'to be used for the benefit of...' is another option. 

Thank you! 😁 

Yes I will definitely get to will making ASAP. I suppose for now I could put my partner as the sole beneficiary and then whoever I want to be the next guardian as an alternative beneficiary. In the case of the latter, would it make sense to write in the will regarding this person taking over responsibility of the child's Junior ISA, with the pension funds going in there? Or is that overly complicated? Just would be concerned with the funds going in to anything other then a trust fund or JISA where my child won't automatically gain control of the account when they turn 18.

LHW99

Review insurance too - a Family income policy (decreasing term life insurance) is a relatively cheap way of ensuring a regular income for a surviving parent if one passes while the children are young.

Decreasing term is cheaper to buy (I think) because although the insurers have a fixed term over which to make annual payments (eg £10k pa for 18 years), they have a smaller liability as years go on. Averaged over multiple lives that's better numbers than being on the hook for an equivalent lump sum amount (eg 18 years at £10kpa = £180k total) over a fixed term.

jcarmel

LHW99 said:

Review insurance too - a Family income policy (decreasing term life insurance) is a relatively cheap way of ensuring a regular income for a surviving parent if one passes while the children are young.

Decreasing term is cheaper to buy (I think) because although the insurers have a fixed term over which to make annual payments (eg £10k pa for 18 years), they have a smaller liability as years go on. Averaged over multiple lives that's better numbers than being on the hook for an equivalent lump sum amount (eg 18 years at £10kpa = £180k total) over a fixed term.

Thank you for your advice!

MX5huggy

A JSA is not a suitable vehicle for this because it has a £9000 per year deposit limit.

jcarmel

MX5huggy said:

A JSA is not a suitable vehicle for this because it has a £9000 per year deposit limit.

Thank you, can you suggest an alternative?

xylophone

You mention a workplace pension - I assume that this is a DC rather than a DB Scheme as a DB Scheme usually has specific rules

regarding death benefits and dependants' pensions.

Have you checked the  scheme information regarding what happens to your pension in the event of your death?

Example

https://thepeoplespension.co.uk/pension/manage/what-happens-to-your-pension-when-you-die/#:~:text=So if there's still money,you start taking money out.

 While you can name your child's guardian in your will and bequeath your personal assets via your will,  this is not true of your

pension.

See https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/pensions-and-inheritance#:~:text=Your pension isn't legally,' form, or something similar.


If your child is the sole beneficiary and is under age 18 when you die, then the  Administrator would expect  the child's legal guardian

to  open an account in  Trust for the child to which the money could be paid.

You should remember that beneficiaries of Trusts are dependent on the probity of the Trustees.

You seem to have misunderstood what a JISA is.

See https://www.gov.uk/junior-individual-savings-accounts

It is simply a savings account with a maximum annual subscription which a parent or legal guardian can open for a child.

Thus, if your  minor child had such an account at  the time of your death, the Trustee of  the Trust fund set up to receive your pension

fund (and presumably any bequest/legacy from your will) might choose to use part of the Trust fund to contribute to the JISA.

If the child did not have a JISA at the time of your death, the  child's legal guardian might choose to open one and apply some of his 

Trust Fund to contribute to the JISA.

jcarmel

xylophone said:

You mention a workplace pension - I assume that this is a DC rather than a DB Scheme as a DB Scheme usually has specific rules

regarding death benefits and dependants' pensions.

Have you checked the  scheme information regarding what happens to your pension in the event of your death?

Example

https://thepeoplespension.co.uk/pension/manage/what-happens-to-your-pension-when-you-die/#:~:text=So if there's still money,you start taking money out.

 While you can name your child's guardian in your will and bequeath your personal assets via your will,  this is not true of your

pension.

See https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/pensions-and-inheritance#:~:text=Your pension isn't legally,' form, or something similar.


If your child is the sole beneficiary and is under age 18 when you die, then the  Administrator would expect  the child's legal guardian

to  open an account in  Trust for the child to which the money could be paid.

You should remember that beneficiaries of Trusts are dependent on the probity of the Trustees.

You seem to have misunderstood what a JISA is.

See https://www.gov.uk/junior-individual-savings-accounts

It is simply a savings account with a maximum annual subscription which a parent or legal guardian can open for a child.

Thus, if your  minor child had such an account at  the time of your death, the Trustee of  the Trust fund set up to receive your pension

fund (and presumably any bequest/legacy from your will) might choose to use part of the Trust fund to contribute to the JISA.

If the child did not have a JISA at the time of your death, the  child's legal guardian might choose to open one and apply some of his 

Trust Fund to contribute to the JISA.

Thank you for your detailed answer. I think the confusion stemmed from the concept of an account in trust. When I tried to research trust accounts for children, I initially only found information on the previously government funded Child Trust Funds, and JISAs being their 'replacement'. I have since looked harder and now understand better regarding trust accounts.
I haven't yet read through all of my workplace pension's policies on death before retirement (I currently have four, two from the same employer when they switched providers), so I will make sure to do this.
Your input was very helpful, thank you.