The Importance of Nominating Your Pension Beneficiaries
Over the past month, we’ve been making sure that our clients have nominated who they wish to benefit from their pension funds in the event of their death.
For some, it may not have been clear, or in line with their current wishes who they would like to benefit, and so we have been asking them to complete new instructions which make this explicit. In some cases, there may have been no nomination at all.
How might this have happened?
It is not uncommon for people to overlook this and many assume that the pension benefits will automatically follow the directions within their will. Where new pension plans have been added or maybe moved into drawdown, any previous nomination may not have applied. We would like to think that sense would prevail, but it is always better be explicit than hopeful.
What could it mean to you?
- Who receives your pension benefits upon your death will be decided by the pension trustees, who of course, will not be familiar with you, your family or your wishes
- The distribution of your pension benefits may be very different to your will
- If the nomination is not current, a previous spouse in the case of divorce, could benefit
- The course followed by the trustees may not be as efficient in terms of estate and inheritance tax planning
- There could be a delay in the benefits reaching those who need them as soon as possible, adding to financial worry alongside emotional heartache
What about other pensions
If you have any other pensions (for example workplace pensions, or even smaller plans which do not form part of your main portfolio), it is important to check the nominated beneficiary on each of those as well.
Some examples of what we have seen in the past
At the very time that you have lost a loved one, the last thing you will want to be faced with is a battle around their finances. We’ve recently seen an example where the beneficiary was not explicitly named, and between us and the client, we had a massive challenge for the pension company trustees to act promptly, and follow the genuine wishes of the deceased.
In another case, ‘my wife’ was the instructions. Sadly, that relationship had ended, but they never divorced, so technically, the benefits would have gone to the estranged wife, which was in complete contradiction to the rest of the client’s estate as outlined in his will.
At best, not nominating the beneficiaries can result in a delay in receiving funds, but at worst, it can mean that they never get to the intended people, leaving them both emotionally and financially in tatters.
What action should you take?
Cast your mind back and think if there are any pensions which you have where you may not have nominated the beneficiaries – it is always best to check all plans rather than miss one.
The process of nomination is the completion of a very simple form, and this in turn could save a lot of heartache.
If it is not a plan managed by your Financial Planner, remember to keep a copy of the nomination form with your other paperwork (your will).
On the subject of wills, also make sure that this is up to date, along with a Lasting Power Of Attorney – we’ll cover off those topics in the coming months.