How important is a correctly worded contingent nomination? What are the benefits and why?
Should your clients consider expressing their wishes to the Pension Provider(s) by establishing a more detailed Nomination form than previously necessary?
Previously this could potentially be done after death, however, with the introduction of Pensions Freedom, this is no longer the case. 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 for your client to name their nominated beneficiary(s) for the flexi access to apply. It is therefore imperative your clients review their nomination regularly, particularly if they have children/ more children etc. who would need to be named in the nomination document.
What are the implications of no nomination or a basic nomination?
- The Pension Death Benefits may be paid to someone the client did intend.
- The Pension Death Benefits may become subject to IHT on the death of your nominated Beneficiaries should they receive lump sum funds absolutely.
- The Pension Death Benefits may be paid to a Beneficiary who is about to Divorce or enter Care, for example, and may be diminished.
- The Pension Death Benefits may become subject to IHT on the death of the nominated Beneficiaries should they receive funds absolutely.
- It may limit the Taxation and Bloodline Planning options for the Beneficiaries.
Why let your clients leave their hard earned pension funds to chance?
The best advice is to put in place a carefully worded and bespoke Nomination for each Pension Plan Provider. This can ensure maximum flexibility and efficiency, irrespective of the type of Pension that the client(s) hold now. This needs to be reviewed in the event that the scheme changes or the benefits are transferred to another Pension Provider / employer.
CONTINGENT UPON THIS BEING THE APPROPRIATE COURSE OF ACTION, THE CHOSEN TRUSTEES COULD ACCEPT OR REFUSE THE FUNDS.
In the event a spouse/partner or children could receive and retain the Pension fund to take ‘Flexi Access’ benefits, then the Trustees would refuse to accept the funds in most circumstances, it allows the Trustees to make the best decision at the time rather than casting a decision now.
- The new more detailed and contingent Nomination Form must be put in place prior to death. The nominations are contingent on the Trustees accepting, or refusing to accept the funds in favour of the other nominated Beneficiaries if they receive these on more tax advantageous terms.
- Appoint Trustees to the Family Pension Benefit Trust(s) who can make the decision whether to accept the Pension Funds on death or optimise the flexibility and Tax benefits of the new Pensions Freedom Legislation should this be available.
- Nominations should be reviewed should the Pension Provider’s terms change or if the client transfers or join another Pension Scheme.
- The Company Death in Service Payment and the Personal Pension Plan may require separate Nomination forms.
This month’s Webinar will discuss the importance of a correctly worded contingent nomination in further detail, the benefits and flexibility this can provide your client.
In addition to the above our experts will explore the difference between Death in Service and Pension Death benefits and how you can help your clients to plan for them.
They will also explain Lifetime Allowance and whether QROPS are an option for client’s with Lifetime allowance issues and large pensions.
Register now to reserve your space
All webinars are held at 10am until 11am
This article was submitted to be published by Countrywide Tax & Trust Corporation Ltd. as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.
