Terminal Illness Vs Pension

robert_harper_2000

Pensions are Tax efficient but if for example I needed 24hr care when I was between the ages of 30-50. The pension would be considered part of my estate, which would affect who contributes to my care? Is this correct?

dunstonh

The pension is never part of your estate. It is held in trust outside of your estate. If you are unable to access your pension early because the trustees dont feel you are ill enough then the pension is not included in any means test. Unlike other savings/investment options like ISA.

robert_harper_2000

I appreciate your help here. So if I put away £300pm then fell ill at 30 died around 15-20 years later. Requiring care until I died. Then the funds would be in estate for my next of kin?

dunstonh

Then the funds would be in estate for my next of kin?

No. They are never paid to your estate. They are paid outside of the estate to your nominated beneficiary with no tax liability. (No IHT, No clawback or tax relief or tax free growth).

Occupational final salary schemes have slightly different rules to personal pensions so it is worth clarifying which you are looking at.

zzzLazyDaisy

Edit - to clarify - dunstoh correct me if I am wrong..

Also it is never true to say that ALL the funds would be available to your named beneficiary on death.

If you have a pension there may be provision for a lump sum and/or a widow's or dependent's pension to be paid to a particular person who you have nominated. This is at the discretion of the pension scheme trustees although they will normally follow your wishes.

However, this does not mean that the whole pension pot will simply be handed over to your next of kin, because it doesn't work like that.

dunstonh

It is those areas where we start seeing differences between personal pensions/money purchase schemes and final salary schemes.

The trustees can overrule a frivolous nomination. It doesnt happen often but it can occur. Death benefits will also be different with protected rights as well.

However, ordinary rights (personal contributions) built up in personal pensions will get paid to your spouse if you have him/her as nominated beneficiary.

robert_harper_2000

I am a director so pension would be a shareholder scheme. What should I ask my pension advisor?