Imagine that you re-married and were unfortunate enough to die earlier than expected… This isn’t a pleasant thought, but it could get worse – your ex-wife or husband may also be entitled to your pension proceeds!
Yes, this is fairly unbelievable, but it could happen if you hadn’t updated your expression of wish form with your new partner’s details.
It’s simply a formal request to the trustees or administrator of your pension scheme, setting out who you’d like to receive your pension benefits on death. It isn’t a legally binding document but it’s rare to hear of cases where the trustees have refused to carry out the wishes as intended.
In my divorce scenario above, you could hope that the trustees would act with common sense and consider the change of circumstance. A more common example is where someone marries for a second time but has nominated their children from their first marriage. Now, it may be the case that this is still the individual’s wish. However, this could be open to considerable legal challenge if the ‘expression of wish’ pre-dated their second marriage. Not only could it cause a huge delay in your loved ones receiving any money but it has the potential to lead to a major family fallout.
In conversation with Jack Munday and Jordan Gillies
Our team are well-versed in estate planning. Our advisers can guide you through the options to make the right decision for you and your family. Get in touch to discuss how we can help you.
It’s also important to highlight that there’s no limit to the number of beneficiaries you can name if you want more than one person to inherit. Although, you should be careful not to overcomplicate things, particularly if you haven’t received any advice. All too often, I have seen overly complex expression of wishes having unwanted tax implications.
Talking about tax: since 2015, a change in the rules on flexible death benefits has meant that, if the deceased was over 75, a beneficiary can choose whether to take the inherited pension proceeds as a lump sum or as a regular income. Both of these options, however, are taxed at their marginal rate, so there could be a whopping amount of tax to pay if the wrong choice is made.
If you fail to keep your expression of wish form updated and it’s clear that it is outdated, the trustees may have to use their discretion to change who they pay the money to. This has the potential to reduce the beneficiaries options with some providers only allowing lump-sum payments under these circumstances. This could have unnecessary tax implications and make an already difficult situation even more challenging.
The expression of wish form may seem like just a piece of boring paperwork that you receive when you start a new job or change pension provider, but it’s vital for ensuring the wrong person doesn’t inherit your money, or that the right person isn’t hit with unnecessary taxes. You can update it whenever you like – either ask your pension administrator directly or your HR team to provide the relevant form.
Just ensure you keep on top of your expression of wish form to avoid an inheritance blunder…
Our team are well-versed in estate planning. Our advisers can guide you through the options to make the right decision for you and your family. Get in touch to discuss how we can help you.
All authors have considerable industry expertise and specific knowledge on any given topic. All pieces are reviewed by an additional qualified financial specialist to ensure objectivity and accuracy to the best of our ability. All reviewer’s qualifications are from leading industry bodies. Where possible we use primary sources to support our work. These can include white papers, government sources and data, original reports and interviews or articles from other industry experts. We also reference research from other reputable financial planning and investment management firms where appropriate.
Saltus Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority. Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested. Tax rules may change and the value of tax reliefs depends on your individual circumstances.
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