Is it possible to designate any individual as our pension beneficiary? Response from STEVE WEBB clarified.
In case you're wondering about your Sipp drawdown pension death benefits, here's what you need to know:
First off, you can decide who gets your pension pot after you pass away. This choice is not limited to family members; you can name a friend, trust, or charity if you prefer.
For conventional salary-related pensions, usually, the money goes to a spouse, partner, or financially dependent children below the age of 23. This isn't the case with your type of pot-of-money pension, such as yours.
The pension scheme administrator will make the final call on where the money goes. However, they usually follow your nomination through the "expression of wishes" form you filled in. But if times change, and there's ambiguity in your initial form, they may use their discretion to decide where the funds should go.
If you wish to leave your pension to an unconventional beneficiary, such as outside the immediate family, it's advisable to provide additional information for the pension provider. This could help protect your wishes in the event of any challenge.
It's crucial to double-check with the pension provider who you want to benefit from your death, and to make sure your wishes are up-to-date, especially after major life events occur. An annual review could help avoid unnecessary complications.
As a side note, when you name someone as the beneficiary, they have more options regarding the pension pot’s usage. Someone named on the form can choose drawdown rather than a lump sum, and this could be beneficial when dealing with inherited pension pots that are subject to income tax if the deceased was 75 or older.
Make sure your financial adviser and solicitor are aware of your preferences, and if necessary, retain a written record of your decisions for reference.
Further Insights:
- It's important to note that if your spouse inherits your pension via beneficiary's drawdown, they can subsequently nominate their own beneficiaries if they wish. After your spouse's death, the funds may go where they've chosen, unless you set up nominations like a bypass trust to maintain control over the next generation's inheritance[4].
- In case the pension scheme asks your adviser or solicitor for their views, having a letter on file noting your chosen beneficiaries could offer additional reassurance to the pension provider, especially if there have been changes in your circumstances[5].
- You can choose who receives your Sipp drawdown pension pot after your death, and the choice is not limited to family members; you can name a friend, trust, or charity if you prefer.
- If you wish to leave your pension to an unconventional beneficiary, it's advisable to provide additional information for the pension provider to protect your wishes in the event of any challenge.
- In case you remarry, it's crucial to update your nomination of beneficiaries for your pension to reflect your current wishes.
- In case you nominate someone as a beneficiary of your pension, they have more options regarding the pension pot’s usage, such as choosing drawdown instead of a lump sum, which could be beneficial when dealing with inherited pension pots.
- If you seek financial advice, make sure you nominate your preferred beneficiaries and retain a written record of your decisions to ensure that your wishes are carried out according to your plans, especially after major life events occur.
