Ask the Expert: Where should my son’s pension pot go after his death?
- Credit: Archant
Q. I lost a son earlier this year, aged 62, seven months after he lost his wife.
He left a will which is being dealt with, but not his pension pot money. Can you please tell me if it should be paid into my late son's account or to me as I'm his next of kin.
My other son had to do all funeral arrangements as I'm 92 next month, disabled and unable to help.
We have a letter from pension companies to say it should be paid to me. But what is right?
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A. Pension death benefits are not normally part of a will but are set out in the pension scheme.
Pension scheme holders are asked to complete a nomination or 'expression of wish' form to nominate to whom the benefits should be paid on their death.
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It sounds like your son must have either nominated you or not completed a nomination form at all, leaving the pension company to pay the pension benefits to you as his next of kin.
It is worth checking with the pension company if your son did complete a nomination form or not.
As your son was under 75 when he died, his pension death benefits are passed on free of both Inheritance Tax (IHT) and income tax.
One option you might want to consider is to take the death benefits in the form of a pension fund for yourself. Even if you don't need the pension income, this gives you the option to pass any pension benefits remaining on your death to your other son in a tax-efficient way. He can then withdraw the transferred benefits either as pension income or as a cash sum.
The alternative would be for you to take the death benefits as a lump sum and then pass it to your other son as a gift, although this may have IHT implications if you die within seven years of making the gift, depending on the value of your total estate.
Whatever route you decide to adopt, I recommend you talk to a financial adviser to ensure that it is set up properly to keep it tax-efficient. Importantly, if you do decide to take the benefits as a pension, please make sure you complete a nomination form to ensure that the money finally goes to your chosen beneficiaries.