Getting your ducks in a row: death benefits from pensions
15 August 2024A contact approached me some time back to look at her financial planning on a pro-bono basis as personal finances were a little tight and she wanted to consider her options. With some guidance provided, she continued with her planning, reverting occasionally when needed as life continued…for a while.
Circumstances changed quickly when she was diagnosed with an aggressive form of cancer, which was terminal, and she had only a few months to live. Her Will was up to date and the executors had a copy to ensure all would be dealt with in order and in a timely fashion.
Having understood the client's circumstances from the past, we quickly reconvened regarding her financial planning position and focused on her pensions. She was not married but had been the higher earner and had a financial dependant. The terms of any continuance after death of pensions from old employers were initially not clear.
Making contact with current and historic schemes can be vital at an early stage in these circumstances. Letting them know the prognosis, points of contact and ensuring that they are up to speed with details of spouse / civil partner and financial dependants is highly recommended. Schemes will want to know contact points in the event of death and providing clarity can make a real difference and smooth the process. If you have any doubts as to your position and any continuation options, then communicate with the scheme early.
The same applies for personal pensions and defined contribution plans, to ensure any death nominations are current and up to date. Please note that HMRC reserves the right to review plans if a nomination has been changed in the two years prior to death.
From a timing perspective, it can take a few weeks / months for a spouse's / civil partner's / financial dependant's income to come through, so where possible, the recipient needs to maintain some cashflow until all is resolved, normally resulting in some backdating. Be ready for the potential delays.
The financial dependant wrote subsequently:
"…the pension kicks in next month with back payments which is such a bonus for me, and the other scheme paid a lump sum and will get an income a month from now on - all thanks to your so helpful input for Beth - obviously would rather have dear Beth with me but the pension is truly great…I am so grateful Keith…many, many thanks…"
Although a very satisfying outcome, much work was achieved in advance to ensure as far as possible that this was the case. In a difficult situation, this was time well spent and protected the family for the future.
Please do take time to check your position, but also to engage with a financial planner as you move through life to be ready to help you in both the good times of life, and sadly the not so good.
No individual advice is provided during this blog. The identity of the individual referred to in the comment above has been changed to maintain anonymity.
Keith G Churchouse FPFS
Director
Chapters Financial Limited
