Nomination of Beneficiary

planteria · 13 January 2019 at 5:38PM

I decided to leave my four Personal Pensions to my two sons, and requested the paperwork to do so. the values are not high, but my thoughts are that if i were to pass away before retirement age i'd like them to become growing pension pots for them, with plenty of time to grow.

from Royal London the form that has arrived includes two options: Option 1 - At Our Discretion or Option 2 - At My Discretion. i don't think it should make a huge amount of difference, but RL say that choosing Option 1 avoids inheritance tax being payable. also, an investor can choose Option 2 and then choose Option 1 at a later date, but once an investor has chosen Option 1 they cannot then change their mind.

as it happens I have a Bond, a small ISA and a Flexible Savings Plan which I am looking to allocate to my sons too - choosing to allocate an investment to one of them, rather than for each to be split between them. the ISA is with Royal London, so i have a similar form which I could use for this - i think (they haven't mentioned the ISA in their covering letter, but they've sent me two forms).

any thoughts as to the best Option?

dunstonh · 13 January 2019 at 5:59PM

ISAs form part of your estate and will follow instructions laid out in your Will.

Pensions are outside the estate. Option 1 is best as that keeps it tax free on death before 75.

planteria · 13 January 2019 at 6:39PM

thank you dunston..

so perhaps their second form was a mistake.

and understood, but is there any circumstance in which someone might specify 'My' not 'Our(Their)' discretion?

kidmugsy · 13 January 2019 at 7:14PM

planteria wrote: »

is there any circumstance in which someone might specify 'My' not 'Our(Their)' discretion?

If you died with your only close kin a sibling you hated, you might not want the trustees to assume that that was a sensible place to pay the money. So you could specify a Donkey and Tortoise Charity if you wanted.

(Note: this is not necessarily an allusion to Mr Corbyn and Mrs May.)

planteria · 14 January 2019 at 9:40PM

thank you km..

dunstonh wrote: »

Pensions are outside the estate. Option 1 is best as that keeps it tax free on death before 75.

.. does that include the pension being transferring to one of my sons as a pension, ie. becoming his own pension pot?

Brynsam · 14 January 2019 at 11:38PM

planteria wrote: »

thank you km..

.. does that include the pension being transferring to one of my sons as a pension, ie. becoming his own pension pot?

Yes, it does.

planteria · 15 January 2019 at 2:33PM

thank you.. how can we specify that that is what we want to happen, via a will, or with the pension provider? or does a pension pot never just transfer into an inheritable estate?

HappyHarry · 15 January 2019 at 3:36PM

planteria wrote: »

thank you.. how can we specify that that is what we want to happen, via a will, or with the pension provider? or does a pension pot never just transfer into an inheritable estate?

If you give guidance to the pension provider (option 1) via an expression of wishes / nomination of death beneficiaries, then in the event of your death the value of your pension remains outside of your estate, and is not counted for inheritance tax purposes. Pension providers invariably follow the expressed wishes of the deceased, unless there is very good reason not to. (e.g. divorce and remarriage since form completed).

If you insist with the pension provider who your pension goes to (option 2) then your pension funds will form part of your estate for inheritance tax purposes.

planteria · 20 January 2019 at 2:20PM

thank you HH. i hope not to die any time soon.. but i am just trying to get things set up as a i want them regardless. a small pension pot for the future for each of the boys (they are only 1 and 2) seems like a good idea to me.

Nomination of Beneficiary

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