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  • FIRST POST
    • helpkitty
    • By helpkitty 11th May 18, 2:12 PM
    • 45Posts
    • 15Thanks
    helpkitty
    SIPP Beneficiary payment
    • #1
    • 11th May 18, 2:12 PM
    SIPP Beneficiary payment 11th May 18 at 2:12 PM
    Hi Everyone
    If the beneficiary (named on the nominations form) was under 18, how would they be paid out?

    It is a sipp pension which was transferred from another pension less than 2 years ago and the pension holder was under 55 when they passed away if that makes any difference!

    Thanks in advance if anyone has any advice/experience of this!

    Thanks
    Kitty
Page 1
    • kidmugsy
    • By kidmugsy 11th May 18, 2:28 PM
    • 12,066 Posts
    • 8,515 Thanks
    kidmugsy
    • #2
    • 11th May 18, 2:28 PM
    • #2
    • 11th May 18, 2:28 PM
    The first question is whether they want to be paid out now or whether they'd rather keep the money in its tax shelter. Or a mixture of the two.

    Have you looked at the SIPP provider's website? How old is the beneficiary?
    Free the dunston one next time too.
  • jamesd
    • #3
    • 11th May 18, 3:13 PM
    • #3
    • 11th May 18, 3:13 PM
    The executors or administrators of the deceased's estate need to be aware that this money is considered to be part of the estate for inheritance tax calculations. The usual pension trust protection doesn't apply because of the transfer within two years of death.

    The child will get a beneficiary pension in their name. They can withdraw any amount from this at any time/age tax free because death was before age 75. In effect they have a prefunded super-ISA with all of the pension tax benefits on growth combined with the ISA flexibility. This is so beneficial that it's likely to be best left there until there's a reason to spend some.

    The minor's trustee will be the person who actually carries out the actions until they reach 18.
    • helpkitty
    • By helpkitty 11th May 18, 3:27 PM
    • 45 Posts
    • 15 Thanks
    helpkitty
    • #4
    • 11th May 18, 3:27 PM
    • #4
    • 11th May 18, 3:27 PM
    Thanks for the replies.

    The child is 10 & the deceased's estate is insolvent.

    Would the childs trustee be their remaining parent?

    and if so the trustee could withdraw the full amount on behalf of the child?

    and if left, would it still be invested in shares and therefore be at risk of going down in value?

    Thanks in advance!
  • jamesd
    • #5
    • 11th May 18, 3:47 PM
    • #5
    • 11th May 18, 3:47 PM
    The money isn't part of the estate so far as insolvency goes, I think, but wise to get confirmation of this.

    Yes, the trustee would normally be the surviving parent. As long as the money is being spent for the benefit of the child they could withdraw it all. Housing, food, clothing and education costs are examples of for the child spending. Housng can include buying a home in the name of the child for them to live in and later sell as an adult.

    In cases like a surviving parent with gambling or drug problems the pension company should be informed, since a different trustee might be necessary to protect the child's financial interests.

    The trustee would determine the investments, usually with professional advice from an IFA if they aren't an experienced investor. They have an obligation to invest sensibly and for a ten year old that would normally mean at least 60% in share funds if most of the money wouldn't be spent by age 18. Shares go up and down routinely and it's only something to be concerned about for the portion of the money that will be spent in the next few years. A rolling couple of years of spending in cash and bond funds would be sensible. The same applies if it was withdrawn from the pension. It's pretty common for trustees to have little experience with investing and need help.
    Last edited by jamesd; 11-05-2018 at 3:52 PM.
    • xylophone
    • By xylophone 11th May 18, 3:59 PM
    • 27,294 Posts
    • 16,325 Thanks
    xylophone
    • #6
    • 11th May 18, 3:59 PM
    • #6
    • 11th May 18, 3:59 PM
    The executors or administrators of the deceased's estate need to be aware that this money is considered to be part of the estate for inheritance tax calculations. The usual pension trust protection doesn't apply because of the transfer within two years of death.
    Is this always the case? The suggestion here is that there may be a problem if the pension holder made the transfer to SIPP whilst in ill health?

    https://www.moneymarketing.co.uk/issues/22-september-2016/37-charlene-young-iht-pension-transfer-window/

    If the pension does indeed form part of the estate and the pension holder was insolvent on death, does this mean that it must be used to settle the deceased's debts before any payment can be made to a beneficiary?

    https://www.taxation.co.uk/Articles/2015/04/14/332907/new-approach

    The executor/PR of the deceased should take expert advice?
    • Marcon
    • By Marcon 11th May 18, 4:05 PM
    • 541 Posts
    • 404 Thanks
    Marcon
    • #7
    • 11th May 18, 4:05 PM
    • #7
    • 11th May 18, 4:05 PM
    Is this always the case? The suggestion here is that there may be a problem if the pension holder made the transfer to SIPP whilst in ill health?
    Originally posted by xylophone
    Not always the case, but HMRC will certainly get the magnifying glass out if the pension holder was in ill health. Good explanation here: https://www.oldmutualwealth.co.uk/Adviser/literature-and-support/knowledge-direct/pensions/death-benefits/pension-transfers-and-potential-iht/
    • Marcon
    • By Marcon 11th May 18, 4:12 PM
    • 541 Posts
    • 404 Thanks
    Marcon
    • #8
    • 11th May 18, 4:12 PM
    • #8
    • 11th May 18, 4:12 PM
    The money isn't part of the estate so far as insolvency goes, I think, but wise to get confirmation of this.
    Originally posted by jamesd
    Correct - but given the complexity of this case it would be wise, as you suggest, to get proper advice, not rely on answers given on a forum where those responding don't have all the facts.
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