SIPP benefits after death, and nominations

meridian30

My wife died in June, leaving a SIPP. She'd completed an expression of wishes which nominated me as the first beneficiary, and our two adult children as secondary nominees at 50% each. I appreciate that nominations are only guidance to the SIPP trustees who are the ultimate decision-makers. The managers have agreed that I can waive my nomination, but are saying that our children can only receive their 50% each as a cash lump sum, which will partly be taxed at 45%.

The managers have so far been unable to say why the children can't have their share transferred to SIPPs in their own names, so they can draw money when they need it.

Does anyone else have any experience of this situation, please?

Many thanks.

SVaz

Surely you take the payment/ Sipp and then gift them the money, assuming your Wife was under 75 then it will be tax free.

LHW99

I think the fact that this is legal doesn't mean all companies allow it. does this page help?

https://www.ii.co.uk/analysis-commentary/what-are-your-options-when-you-inherit-sipp-ii531907

(Section 5)

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82172371#Comment_82172371

Not a good idea. Such a gift would be a Potentially Exempt Transfer, and if OP dies within 7 years of making the gift…

dunstonh

Does anyone else have any experience of this situation, please?

It is strange that a SIPP provider cannot facilitate what you want. The whole point of a SIPP is to have functionality and flexibility that doesn't exist on personal pensions, stakeholder pensions or other legacy style pensions. A restriction on those would not be uncommon. However, most of these have ways around it.

Can you verify that it was a SIPP that your wife had? I know you said SIPP but its a frequent mistake that we see on these forums that people refer to their pension as a SIPP when it isn't.

Can you also name the provider as it will those of us with experience of that provider to provide better answers.

If the pension provider is closed for new business, that would be a common reason whey they cannot open a new beneficiary account. However, it wouldn't stop the opening of a new one elsewhere. So, have they said that they cannot open a new pension or have they said they cannot transfer to another provider? (or both).

Are the children resident in the UK or overseas?

We can assume that your wife was over 75 at the time of her passing given your comments about tax?

DRS1

Just one thought on the ability to transfer to your children's existing pensions (if that is what you mean by "SIPPs in their own names"). I don't think you can mix an inherited pension with your own pension. There will be a special tax treatment for the inherited pension which doesn't mix well with the treatment of your own pension (eg no 25% TFLS). So the money would need to go to a beneficiary drawdown pension.

meridian30

https://forums.moneysavingexpert.com/discussion/comment/82172371#Comment_82172371

If I do that I have to pay 40/45% tax to get the money out of the SIPP, and then the risk (I'm 82) that I don't survive 7 years)

https://forums.moneysavingexpert.com/discussion/comment/82172424#Comment_82172424

I had looked at that (thank you Google), and I agree with most of it, but my managers aren't (yet) convinced.

https://forums.moneysavingexpert.com/discussion/comment/82172443#Comment_82172443

Definitely a SIPP, I know what the alternatives are, and this is a SIPP.

I won't name the managers at the moment, I'm still working on getting them to see sense. My suspicion is that in the past they've forced beneficiaries to take lump sums, and face a big tax bill, and they are afraid that accepting my case would expose them to compensation claims, plus a need to explain themselves to the F

https://forums.moneysavingexpert.com/discussion/comment/82172497#Comment_82172497

CA.One child has a SIPP with the manager, the other doesn't, but in any case I agree with you, the inherited SIPP would need to be kept separate (we've already drawn the 25% tax-free).

DRS1

If your wife's SIPP didn't offer a beneficiary drawdown pension as a choice on her death then you may be stuck. The following note suggests that it may not be possible to transfer the money to another provider which does offer a beneficiary drawdown pension.

Beneficiary drawdown - Royal London for advisers

If that is right it is a shame because that could have been a neat solution.

You may need to have a look at the rules of her SIPP if they won't change their mind.

meridian30

https://forums.moneysavingexpert.com/discussion/comment/82173752#Comment_82173752

That's not what the managers are saying. They appear to be a bit confused about what they are saying, but they haven't said that a drawdown pension is not an option. I am exploring the possibility of transfering the whole thing to RL, as they seem to be more flexible, and I do have an IFA exploring that with the current managers.

DRS1

OK Hopefully that will work out.

I wonder if they are confused because the beneficiary drawdown pension is something pension schemes are allowed to make available but not all of them do (maybe because they are old schemes which predate that sort of thing - you see that with some normal drawdown options which require a transfer to a more modern scheme).

Linton

Could splitting the beneficiary SIPP between the 2 children be the problem?