Help with SIPP pension after mother's death

justme111

My mum died a few days ago, I am trying to sort out finances. This forum helped her a lot over the years so I am hoping it can help me too. She had a personal pension in a SIPP. I am named as the beneficiary. Ideally, I would have the entire pension transferred into my name, but that seems too good to be possible. Say I do get the lump sum, how is best to go about putting it into my own pension? I read that you can only put in the same as you earn per annum, but I am only 20 and starting uni soon so it would take a while to transfer all the money over. In the. meantime, where would be best to keep it? Maybe £20k into an ISA per year? Any advice would be appreciated. I am not well versed in finances, but trying to learn.

zagfles

Sorry for your loss. 

You should be able to set up a beneficiary's drawdown pension in your name, and any withdrawals would be tax free (as your Mum was presumably under 75 when she dies). Any growth in the pension would be tax free too. The SIPP provider should have info on their website, eg an example from HL 
What happens to your SIPP when you die - Hargreaves Lansdown

The usual rules about how much you can contribute to your own pension don't apply to inherited pensions. It's a separate thing. 

justme111

zagfles said:

Sorry for your loss. 

You should be able to set up a beneficiary's drawdown pension in your name, and any withdrawals would be tax free (as your Mum was presumably under 75 when she dies). Any growth in the pension would be tax free too. The SIPP provider should have info on their website, eg an example from HL 
What happens to your SIPP when you die - Hargreaves Lansdown

The usual rules about how much you can contribute to your own pension don't apply to inherited pensions. It's a separate thing. 

Thank you for your response. I am still confused about something, on the website you linked it states "Any money or investments still in your SIPP when you die will normally pass to your beneficiaries." I found a similar article written by my mum's pension company, and they write "Your beneficiaries can decide whether they would like to receive their benefits as a lump sum, or draw an income from the fund." I understand I can withdraw in different ways, but I have not yet seen a confirmation that the pension can STAY as a pension.

Just a thought, if I drew the pension out as an income, would that then count towards my yearly income, meaning I could invest the money straight away into my own pension pot?

penners324

It's very likely that pension becomes yours as a pension. So you won't be able to access this until your 58.

justme111

penners324 said:

It's very likely that pension becomes yours as a pension. So you won't be able to access this until your 58.

That would be the ideal outcome, but so far it's not what I heard happens.

zagfles

justme111 said:

zagfles said:

Sorry for your loss. 

You should be able to set up a beneficiary's drawdown pension in your name, and any withdrawals would be tax free (as your Mum was presumably under 75 when she dies). Any growth in the pension would be tax free too. The SIPP provider should have info on their website, eg an example from HL 
What happens to your SIPP when you die - Hargreaves Lansdown

The usual rules about how much you can contribute to your own pension don't apply to inherited pensions. It's a separate thing. 

Thank you for your response. I am still confused about something, on the website you linked it states "Any money or investments still in your SIPP when you die will normally pass to your beneficiaries." I found a similar article written by my mum's pension company, and they write "Your beneficiaries can decide whether they would like to receive their benefits as a lump sum, or draw an income from the fund." I understand I can withdraw in different ways, but I have not yet seen a confirmation that the pension can STAY as a pension.

Just a thought, if I drew the pension out as an income, would that then count towards my yearly income, meaning I could invest the money straight away into my own pension pot?

Yes it can stay as a pension. It won't count as income for the purposes of how much you can contribute to your own pension, but I don't really see any advantage of doing that as it'd tie the money up till you're 57 or so. 

You're probably best getting advice - if you speak to your SIPP provider they should be able to talk you through the options and they might offer one-off paid financial advice which it could be worth taking. 

Another thing is your Mum mentioned her NHS pension has children's benefits which look like they apply while you're in full time education, so that's something else to look into. 

zagfles

justme111 said:

penners324 said:

It's very likely that pension becomes yours as a pension. So you won't be able to access this until your 58.

That would be the ideal outcome, but so far it's not what I heard happens.

Drawdown from an inherited pension can be taken at any age. 

Marcon

penners324 said:

It's very likely that pension becomes yours as a pension. So you won't be able to access this until you're 58.

That's just plain wrong. There is no minimum age to access an inherited pension, whether taken out of the pension as cash, or set up as a pension for the beneficiary.

justme111

zagfles said:

justme111 said:

zagfles said:

Sorry for your loss. 

You should be able to set up a beneficiary's drawdown pension in your name, and any withdrawals would be tax free (as your Mum was presumably under 75 when she dies). Any growth in the pension would be tax free too. The SIPP provider should have info on their website, eg an example from HL 
What happens to your SIPP when you die - Hargreaves Lansdown

The usual rules about how much you can contribute to your own pension don't apply to inherited pensions. It's a separate thing. 

Thank you for your response. I am still confused about something, on the website you linked it states "Any money or investments still in your SIPP when you die will normally pass to your beneficiaries." I found a similar article written by my mum's pension company, and they write "Your beneficiaries can decide whether they would like to receive their benefits as a lump sum, or draw an income from the fund." I understand I can withdraw in different ways, but I have not yet seen a confirmation that the pension can STAY as a pension.

Just a thought, if I drew the pension out as an income, would that then count towards my yearly income, meaning I could invest the money straight away into my own pension pot?

Yes it can stay as a pension. It won't count as income for the purposes of how much you can contribute to your own pension, but I don't really see any advantage of doing that as it'd tie the money up till you're 57 or so. 

You're probably best getting advice - if you speak to your SIPP provider they should be able to talk you through the options and they might offer one-off paid financial advice which it could be worth taking. 

Another thing is your Mum mentioned her NHS pension has children's benefits which look like they apply while you're in full time education, so that's something else to look into. 

The advantage, it seems to me, would be that I would have a full pension already waiting for me when I get old, instead of letting the money sit in a bank, where there is a danger of me using it all up unnecessarily. I don't need the funds at the moment, I would rather earn myself now and not rely on the pension. I think it would be better off saved for the future, just as my mother had intended it for her. But, as I said already, I have very little knowledge or experience, so do correct me if you can notice a fault in my trail of thought.

Thank you for mentioning the NHS pension children's benefits, I have started looking into that now.

MallyGirl

I am sorry for your loss. Please do continue to ask questions - you sound like you already have a good head on your shoulders. Leaving it all in a beneficiary pension until you need it is likely the most sensible plan - as @Marcon says it is not restricted to access after 57 in your case. You could consider using some of the money to fund your university studies, or to give you opportunities to travel, whilst still having a very good foundation for your future.
In days gone past the advice was generally to take all the uni related loans offered but the interest rate being so high, and the payoff period now being extended to 40 years, has swing the pendulum the other way a bit.
There is no need to rush into anything.

barnstar2077

If you have not inherited a property, you may want to consider using some of the funds to get you on the property ladder (once you have finished your studies and know where you will be based going forward.)  Owning your own home is a massive advantage later in life.