Blog

WHY LEAVE YOUR HARD-EARNED PENSION FUNDS TO CHANCE?

NEW PENSION FREEDOM FUND LEGISLATION – POINTS TO CONSIDER

The following information must not be considered to be either investment or Pension advice. It covers the options for dealing with any benefits payable, or available to your chosen Beneficiaries on death from your Pension Plan(s).

Protecting your Pension plan
Any death benefits payable from your Pension could be assessed and vulnerable to any of the following if thought is not given to the options available to you.

Remarriage of your Surviving Spouse
If you die and the death benefits passes to your surviving spouse/partner, what happens if they remarry? Your children could lose all, or part, of the Pension Fund upon the new spouse/ partner’s subsequent death or divorce.

Care Costs
Following your death, should your surviving spouse/partner need Care, then the whole estate would be assessed to pay for the cost of that Care. This may include Pension benefits considered ‘available’ to the care user even if they
are not taking benefits.

Bankruptcy/creditor claims or divorce of your surviving spouse
If your surviving spouse/partner, or a nominated Beneficiary under the new rules, is subject to Creditor Claims, Bankruptcy or Divorce, the fund is fully at risk where the Beneficiary takes the benefits as a lump sum. Where a nominated Beneficiary receives the benefit under the new Flexible Pension Leg
islation, the fund may also be at risk if they later Divorce or become Bankrupt.

The new ‘Pension Freedom’ rules allow you to pass Pension funds onto Beneficiaries who can then access and treat the funds as their own. The ‘Flexi Access’ may be available Tax free as income or a lump sum(s). Your current Pension may not be a ‘Flexi Pension’, but may be amended in the future, or you could move to another scheme that provides the new flexible benefits.

Post April 2015 – Pension freedom rules enable improved Tax free & more flexible access at any time to Pension funds for your nominated Beneficiaries. This is, however, only available should you die before age 75.

Post age 75 – The same flexibility applies, but benefits are taxable as income to the receiving Beneficiary. This could be the whole fund taken as one lump sum or drawn down as an income. One concern here is that unless specifically nominated, the Beneficiary may not be eligible for all the ‘Flexi Access’ benefits. Even if that Beneficiary has decided not to take benefits, could their right to take all or any part of the Pension fund be assessed as if it was their asset or right to income? By not taking these benefits could they be challenged as depriving their estate and Creditors? Please note that the ‘pension freedom’ rules do not apply to every pension plan.

If you die before age 75:

The fund (if the plan has ‘Flexi Access’) can be passed to a fund for a nominated Beneficiary(s). It becomes their Pension and with it all the usual Pension Tax Benefits. So, Tax efficient growth in the fund, access to the fund without restriction, and now Tax free.

If there is no ‘Flexi Pension’ option then the lump sum can still be paid Tax free to the nominated Beneficiaries or Trust, but thereafter growth and income would be taxable on the Beneficiary or Trust. If payable to a Beneficiary then the lump sum would form part of their estate for IHT and other threats.

I strongly advise that you carefully consider expressing your wishes to your Pension Provider(s) by establishing a more detailed Nomination form than previously necessary. It is worth remembering that previously this could potentially be done on your behalf after death. This is no longer the case with Pensions Freedom, where if the Beneficiaries are not nominated by the member in lifetime then the tax paid could be increased significantly.

 

Due to the nature of the legislation, it is necessary to name your nominated beneficiary(s) for the flexi access to apply. It is therefore imperative to review your nomination regularly, particularly if you have children/ more children etc who would need to be named in the nomination document.

The Potential pitfalls of no Nomination or a basic Nomination:

  1. The Pension Death Benefits may be paid to someone you don’t intend.
  2. The Pension Death Benefits may be paid to a Beneficiary who is about to Divorce, or enter Care, for example and may be lost to your intended Beneficiaries.
  3. The Pension Death Benefits may become subject to IHT on the death of your nominated Beneficiaries should they receive funds absolutely.
  4. It may limit the efficiency of Tax and Bloodline Planning options for your Beneficiaries.

WHY LEAVE YOUR HARD-EARNED PENSION FUNDS TO CHANCE?

The best advice is therefore to put in place a carefully worded and bespoke Nomination for each Pension Plan Provider. This will ensure maximum flexibility and efficiency on your death, irrespective of the type of Pension that you hold now. This needs to be reviewed in the event that the scheme changes or your benefits are transferred to another Pension Provider.

 

Facebooktwittergoogle_plusredditpinterestlinkedinmail

Sir ken dodd has last …

It is reported that Sir Ken Dodd died at home only two days after marrying his partner of 40 years, Anne Jones. Their wedding …

Why is a lasting power …

Don’t let a stranger have the power to decide how you should be treated medically or where you should be living. Don’t …

Living will or lasting …

An advance healthcare directive, also known as living will, personal directive, advance directive, medical directive or advance …

Are regular cash gifts …

The Local Government and Social Care Ombudsman has criticised North Yorkshire County Council for refusing to pay for an elderly …

Inheritance row exposed …

Police were called to a Farm in Cheshire on 6th December when Adam Scott called after a long running dispute with Jennifer Redgrave-Scott …

Barnet a hotspot for …

HMRC collected over £5bn in Britain’s most hated tax in 2016-2017. Inheritance Tax is charged at 40% on any assets remaining …

Help, i’ve been asked …

The number of people making Lasting Power of Attorney (LPA) has trebled since 2010. This is good news. LPAs allow you to …

Business lasting power …

A business Lasting Power of Attorney is a powerful legal document which allows a business owner (Donor) to appoint persons …

Case study: michael …

How Michael and Sarah secured an Inheritance-Tax-free legacy for their daughter and planned a secure retirement for themselves. …

Thinking of giving your …

If you’re thinking about transferring a house to children you should read this blog. I am often contacted by families …

Please encourage …

Estate planning is usually left to later in life. However, sometimes things happen that require you to think about it earlier. …

Inheritance tax tops …

Most Brits still haven’t considered the impact of inheritance tax despite wanting to leave assets to their loved ones. …

Office of the public …

The Office of the Public Guardian has admitted charging excessive fees for issuing Powers of Attorney in the last four years. …

Think a joint bank …

Many of us wrongly assume that if we have money in a joint account with our spouse, partner child or even business partners …

Protecting the bank of …

According to a survey by Legal & General, more than 300,000 first time buyers were helped onto the property ladder in …

Trust vs prenup

Many people are advised to set up a prenuptial agreement to secure possessions in the event of a marriage breaking down. …

Charities win landmark …

Animal charities win their case in a landmark judgment at the Supreme Court against a Heather Ilott, the woman cut out of …

Joint bank accounts …

There has been lots of debate recently about whether or not a Lasting Power of Attorney is relevant for people who have joint …

The importance of a …

I remember reading the article about Mark Pearson who realised his dream to open England’s first ever crisp sandwich shop. …

Government confirms …

Probate fees to be hiked into the thousands of pounds with increases starting at 40% for estates of 50,000 up to 9202% for …

Are mirror wills dead?

From 6 April 2017 the new Residence Nil Rate Band will be with us. It exempts the first £100,000, rising to £175,000 by …

It’s important to …

OK, so you’ve made a Will, but how effective is the planning behind it? I can’t emphasise strongly enough how important …

Regulated or …

Research by the Legal Services Board (LSB) has found that more consumers are turning to unregulated Will writers because …

What happens to your …

Unless you make it clear that you are writing your Will in contemplation of marriage then marriage will revoke your previous …

Are mirror wills …

Many couples, even after speaking with a solicitor or Will writer, opt for making mirror Wills. This usually involves  leaving …

The problem with diy …

I occasionally shop in the pound shop in my local high street. My expectations of quality are not high so I usually limit …

Can a will be changed …

The simple answer is Yes – but why would you and how? Sometimes beneficiaries are surprised by the contents of a loved …

Inheritance tax …

In last year’s summer budget the chancellor, George Osborne, announced his intention to provide additional relief from …

Are you a grandparent?

Whether you’re a new excited grandparent, or even an old hand, have you thought about how you’d like to help …

Business lasting power …

With an increasing number of people in the UK suffering from some form of incapacity, including the most prevalent Dementia, …

What happens to your …

Pokémon Go is a smartphone game which has been downloaded over 7.5 million and is now available in the UK. The aim is to …

Should i use a …

The Office of the Public Guardian (OPG) was set up to protect people who may not have the mental capacity to make certain …

How will rising probate …

In a bid to help pay running costs for courts and tribunals a new probate fee system proposes to replace the £215 flat fee …

Planning for the care …

We British are known for being a nation of pet lovers. Sadly, very few of us consider who will take care of them, and how …

Man allowed to …

When can you challenge a Will? When do you, in the court’s opinion, have a valid case and can challenge the express wishes …

No sign of …

The passing of Prince has certainly taken many by surprise and it leaves a huge hole in the music industry. However, the …

Mum knows best (on …

The non-story causing uproar in the papers recently was the revelation that David Cameron’s mother gifted him £200,000 …

Does the thought of …

What if you die and your spouse remarries?   The fact that David Cameron’s mother gave him £200,000 to avoid inheritance …

Lynda …

The story has featured in most of the press as well as television. At first it sounds like something very untoward is happening …

Understanding the role …

Discuss with your proposed executors that they are willing to accept this role before naming them in your Will. Consider …

“my children will …

But, without a Lasting Power of Attorney, this may not happen especially if Social Services and the local authority get involved… …

10 reasons not to write …

1. You’ve worked hard all your life to save for your retirement. Now that your money has outlasted you, wouldn’t it be …

Cohabiting couples

Statistics show around 42% of marriages in England and Wales end in divorce. Consequently, more people remarry for a second …

Joint tenants vs …

There are two ways to hold a property jointly, and they are as follows. Joint Tenants Holding a property with another person …

Step families and …

Why your will could lead to your family being disinherited – and why they won’t have a leg to stand on Legal disputes …

What is estate planning?

The sad truth is that one day you will be unable to take care of your loved ones either because you are incapacitated or …

What if a parent …

Family feuds, fueled by inheritance and Will dispute cases, are on a steep rise. Second marriages after property price hikes …

Will more children …

After a disinherited daughter won her case in the Court of Appeal last week there has been a media frenzy with many saying …

The dangers of not …

Thinking about a Will may not be at the forefront of your agenda – and it could certainly seem like there are far more …

Budget changes that …

Confirmed to be included in the Finance (No.2) Bill 2015 which will be published on 15th July 2015 Inheritance Tax An Additional …

Can i disinherit my …

Writing a Will is a defining moment in life; the type that should come with a backing track and soft lighting. It forces …

What happens when …

It is almost impossible to challenge whatever fee is finally imposed, as lovemoney.com reader Steve from Newcastle found …

Consider the future

I’m often asked why anyone should use a specialist Will Writer to draw up their Will when they know exactly what they want …

Lonely enfield …

In a recent case, a lonely AOP changed his Will two months before his death and left his £500,000 estate to a builder who …

Even with a will, what …

Speaking to the Daily Mail, Stuart Herd claimed that he did not get a single penny of his father’s £300,000 estate …

Can i protect my home …

Many families are watching their inheritance disappear whilst a family member is paying for care home fees. So long as …

Here’s one of our …

Here’s one of our latest customers talking about his experience.

Will writer or …

There is has been much debate about whether to use a Will Writer or a solicitor to draft your Will. I am going to put the …

The bereaved need …

Have you ever thought about what will happen to your social media and other online accounts when you die? Well, maybe you …

A client’s story

I didn’t need much motivation when it came to drafting my first Will shortly after my son was born. But now, 21 years …

Concerned about …

There are a number of ways in which your home, savings and business are vulnerable to attack but, with simple planning in …

You must be clear in …

The late Joan Edwards passed away in September 2012, aged 90, and left a legacy of £520,000 in her Will to “whichever …

Think of the children: …

Intestacy rules may have changed on 1 October, but reminding people of the importance of making a will is still top of the …

Free talk about™care …

We are delighted to invite you to a FREE Talk About™Care Planning event. It is taking place on Wednesday 17th September …

Will claims triple

According to the Chancery Division of the High Court, claims for mishandling a deceased’s person estate have more than …

Why make a lasting …

Your Will deals with your estate and your wishes when you die, BUT have you considered what the situation would be come …

Margaret thatcher …

The children of former UK prime minister Margaret Thatcher will avoid paying millions in inheritance tax because their mother’s …

40% of retirees …

A recent study by The Prudential has revealed retirees, who still provide regular support to their dependants, pay out an …

Council have man jailed …

The story of John Kennedy Jr on the BBC website provides a cautionary tale on the importance of making a Will and getting …

The true cost of not …

Peter & Maxine had both been married before. Maxine had a son, Timothy, who was 11 and lived with them. They also had …

Around 800,000 people …

Sufferers of Dementia cost the economy £23 billion every year and account for a quarter of beds occupied in hospital. The …

Grief can happen when …

I see people, as they approach me, trying to make up their minds whether they’ll ‘say something about it or not. …

Oft: consumers who buy …

Anyone who has written a Will should carefully re-examine the terms. Many Will drafting firms, including leading banks, hide …

Was jimmy hill right to …

Jimmy Hill married three times, got divorced twice and has five adult children from the first two marriages. His youngest …

The 5 threats to your …

Most Will writers & solicitors will only offer a basic Will which leaves your assets exposed to various risks!! Some …

How can i preserve my …

If you own a business either on your own or with business partners, you’ll no doubt be working hard to build it up so it …