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  • Pension pot/inheritance question
  • jamesgarbett
    Free Member

    If I die before retirement age do my pension pots simply become part of my estate to be distributed as per my will?

    footflaps
    Full Member

    All depends on the type of pension pot and what the rules of the plan are.

    With SIPPs the money just becomes part of your estate. Final Salary are more complex….

    cynic-al
    Free Member

    Isn’t the whole point of pensions that they expire when you die?

    footflaps
    Full Member

    Isn’t the whole point of pensions that they expire when you die?

    You’re thinking of an annuity and they differ depending on what you bought e.g. you can buy one where on your death your spouse gets a reduced rate until they die. These will cost you more than one which just expires upon your death.

    And the OP’s Q was ‘before I retire’…

    suburbanreuben
    Free Member

    I believe that any money held in a Sipp at the date of death is IHT free, so outside of your estate, as long as you haven’t started accessing it.

    https://www.youinvest.co.uk/pensions-and-retirement/accessing-your-pension/sipps-and-death

    SIPPs and death
    One of the great tax advantages of a Self-invested personal pension or SIPP is that they allow you to pass on your pension to your beneficiaries on your death. Your beneficiaries can normally choose to take the pension fund as a lump sum or leave it invested in a SIPP.

    What happens to my SIPP when I die?

    You can nominate whoever you like to receive your SIPP on your death. This could be your spouse, children or grandchildren, or you can nominate someone unrelated to you if you wish. You can also leave some, or all, of your SIPP to charity.

    You do not need to leave the benefits to just one person, you can split them in whatever proportion you like, so each of your beneficiaries receives a share of your SIPP. To inform us of your wishes you should complete a SIPP death benefit nomination and expression of wishes form.

    Sorry, I’ve got a bit hung up on SIPPs here. Other pensions probably differ.

    johnners
    Free Member

    point covered above

    footflaps
    Full Member

    I believe that any money held in a Sipp at the date of death is IHT free, so outside of your estate, as long as you haven’t started accessing it.

    Depends when you die and the age of the recipients….

    https://www.youinvest.co.uk/pensions-and-retirement/accessing-your-pension/sipps-and-death

    eat_more_cheese
    Free Member

    You’ll obviously have to check with whatever scheme, however it’s fairly common to have a death benefit nomination form in case you die in service. My pension gets handed back if both myself and death beneficiary die after I draw my pension.

    footflaps
    Full Member

    Just look at one of my final salary schemes, seems quite complex..

    LUMP SUM BENEFIT ON DEATH
    On the death of a Member in Pensionable Service on or after 1 December 2006 there shall be held upon the Discretionary Trusts:
    20.1.1 an amount equal to three times the annual amount of his Final Pensionable Pay; and
    20.1.2 (regardless of whether a pension or allowance is payable under the provisions of Rule 15 or Rule 18) an amount equal to his Additional Voluntary Contributions (if any); and
    20.1.3 (in the event that no pension or allowance is payable under the provisions of Rule 15 or Rule 18) an amount equal to his Member’s Contributions together with Interest thereon to the date of the Member’s death; and
    20.1.4 a Bereavement Grant.
    20.2 On the death of a Member in Service after the date of attaining Normal Pension Date and before his pension has commenced who either has an entitlement to a pension under either Rule 13.3.1 or Rule 13.4 or who died before 1 December 2006, there shall be held upon the Discretionary Trusts:
    20.2.1 an amount equal to sixty monthly instalments of the pension which would have been payable to the Member had he Retired on pension under Rule 13 on the date immediately preceding the date of his death; and
    ?20.3
    20.2.3 his Additional Voluntary Contributions (if any) to the extent that such Additional Voluntary Contributions have not been applied in the provision of lump sum benefits.
    20.7 No lump sum may be paid as a pension protection lump sum death benefit for the purposes of the Finance Act 2004 unless the Member has specified in writing that the payment be treated accordingly.
    Where a lump sum is payable under this Rule 20, the Trustees and the Company may, with that Person’s consent, agree to pay a pension of equivalent value to that Person instead of the lump sum on such terms as the Trustees and the Company think fit.

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