Stand-out Q – nomination part 1…

by

SAT, 24 MAR 2018

Our Technical Hub provides access to a wide range of pension tax and trust technical resources. Every now and then we post tweets covering stand out questions from our technical content and our answers in case others might also find them helpful. As Twitter’s character restrictions only allow for the bare bones of the Q&A we link to the details here, too.

Question:

Who can a SIPP member nominate to receive death benefits?

Answer:

From 6 April 2015 a non-dependant as well as a dependant can choose to take death benefits in the form of a pension and/or a lump sum provided they have been nominated by the member or in certain circumstances by the scheme administrator. A dependant is defined by paragraph 15 of Schedule 28 to Finance Act 2004. The restrictions that existed prior to 6 April 2015 were effectively removed through the ability of the member to nominate a “nominee”.

A short case study can best demonstrate how this might work in practice.

David has a SIPP. In the event of his death, Louise, his wife, would inherit sufficient non-pension assets so that she would have no need to access his pension fund. He is keen for his daughter Alice, who is in her forties, to benefit from his remaining pension fund by way of a drawdown pension. This would not have been possible under the previous rules as Alice did not fall within the definition of a dependant. Under the new rules, David can nominate Alice to be the beneficiary of his remaining pension fund and Alice can choose to take a drawdown pension.

The legislation also provides that any unused drawdown funds on the death of a dependant or nominee, can be passed on to a “successor”. Alice can nominate that any remaining pension fund following her death, should pass to her daughter Amelia. Alice is the “nominee” and her daughter Amelia is the “successor”.

Follow us on Twitter – @JHPartnership

Comments are closed.