According to Royal London, more than 750,000 people are currently at risk of leaving their pension to the wrong person when they die.
Nominating your beneficiaries is completely in your hands but there is the small issue in that you can only do this whilst you are alive.
You can pass 100% to an individual or split the pension between multiple beneficiaries. However, it is important to make sure that this paperwork is kept up to date, so that you do not inadvertently leave your pension to an ex-partner, or unwanted beneficiary.
When you first join a pension scheme, you will be asked to complete a nomination form. That may also include the beneficiary for any death in service benefits if you are an employee.
These forms contain details about how you wish your benefits to be handled upon your death and act to inform the Trustees as to your intentions.
If nothing changes between completing these forms and your death, then all should be fine. However life has a tendency to happen and families rarely stay static for long periods of time. Add to this legislative changes that happen from time to time.
Research using data from the Office for National Statistics (ONS) shows that, among 55-64-year olds, roughly 773,000 people are divorced and have entered a new relationship since the split. If you are one of them, would you want your pension pot to go to your former spouse, your new partner or go directly to your children?
There are no definitive right and wrong answers but if what you want to happen and what was written on your current nomination are different then updating your preferences should be a priority.
Divorce rates are increasing Divorce rates rose by 5.8% between 2015 and 2016 (Source: ONS), whilst the number of marriages and Civil Partnerships is trending downward.
That means more and more people are left to make important decisions about how their pensions are distributed on their death. But, without communicating any changes to their pension provider, they could unintentionally leave their loved ones in a dangerous financial position.
Updating your expression of wish details is not just a change in relationship status that makes it necessary to update your preferences. You should aim to update your details if:
Throughout life, you may wish to update the percentages you are leaving to individuals. This could depend on their current circumstances and lifestyle needs, which will change as they go through life.
Updating your expression of wish preferences is simple, and you can make changes as often as you wish. Just remember that whatever it currently says, is what will happen if you die suddenly.
On top of this regulatory changes over the past few years has changed the way people are viewing their pensions. Many more are seeing them as a method for passing wealth down the generations.
A dependent (think child under 23) or named beneficiary can choose to take their benefits as nominee or successor flexi-access drawdown. Without a nomination though the Scheme Administrators could be unable to allow flex-access drawdown as an option.
With the increase in Final Salary, or Defined Benefit, pension transfers over the past few years and the introduction of Auto-Enrollment we are seeing more and more pensions funds with significant generational wealth invested in them.
Adding a 2nd generation doesn’t cost anything but could be costly if not done.
At Juniper Wealth Management we will be writing to all clients over the summer to offer the chance of updating their nomination of beneficiary forms.
If you have recently transferred out of your Defined Benefit Final Salary pension and are unsure if your death benefit nominations have been completed properly please get in touch on firstname.lastname@example.org or contact us here
Jon Doyle is Founder and Financial Planner at Juniper Wealth Management. Advising clients since 2008 he has guided clients through good time, bad times and the ugly. With a clear vision on how advice should be delivered and strong opinions on how we should be investing money in order to live the life we want to live free from money worry.