Pensions - EoW and Beneficiary Drawdown
Paraplanning831
Member
Hi, just a few questions surrounding EoW and beneficiary drawdown plans.
1) Where an EoW/Nomination of beneficiary is completed, I am of the understanding that this is still at the discretion of the pension trustees. Will this remain the case after April 2027 where the pension becomes part of the estate?
Also with EoW, is there any discretion available to the nominated beneficiaries post-death? i.e. If investor nominates 50% to a child, 25% to another child, and 25% to a grandchild, could the beneficiaries amend this (post-death) so that the while amount just goes to one of them, or the splits change as they wish? Or will the trustees just pay this out according to the nominated splits?
2) I am of the understanding that even post April 2027, an inherited DC pension from a spouse would still retain IHT exemption through spousal exemption.
On the 2nd spouse's death, I understand that the beneficiary drawdown can be inherited again by the deceased's nominee/beneficiary. Does a beneficiary drawdown that is passed on from a beneficiary (so at least one removed from the original member) still retain access to full benefit options (i.e. drawdown, lump sum, annuity purchase) or are there any restrictions imposed on an already inherited pension?
For beneficiary drawdown, post April 2027, I assume there will be an IHT liability on every time that the beneficiary pension funds pass down to the next beneficiary on each death?
Thanks
Comments
1)Pension entering the IHT net does not affect the distribution of death benefits from pension schemes they will work as they currently do unless they actually change their trust deed/rules.
1a) Once a nominated beneficiary has been selected by the scheme and they have exercised discretion in their favour they cannot change things - it would be an unauthorised payment. But during the information gathering exercise a nominee could tell a scheme they do not want any/all of it, they could suggest who they should pay it to instead but that would not count as a nomination. In practice a scheme will usually follow an expression of wish unless they uncover information post death that would make it unreasonable to follow the expression (a nominated person telling them they don't want the money would fit in the camp of making it unreasonable to follow the expression).
2) You're right if a pension death benefit goes to a spouse it will be exempt - it will be included in the estate value but also have a deduction for the exemption.
What happens after beneficiary dies will be dictated by scheme / plan rules - rules rule! Note if you buy an annuity as a beneficiary annuity you cannot have a joint life, value protection or guarantee period.
If it goes to a spouse of the beneficiary when they die then it will be in the estate but exempt just the same as the first death position.