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Admittedly not the happiest of topics, but if you have not got much in your estate, this might be an important question for your loved ones as they pick up the pieces after your death. You may know that State Pensions have been topical over 2023, with many struggling to be able to top up any missing years. The deadline for topping up has now sensibly been put back to 2025, and this has in part highlighted the real value that State Pensions offer. With inflation remaining high, the government's 'Triple Lock' has seen significant increases in pensions in payment over the last year or two.

Looking at the value that the State Pension can offer in the event of a death, amongst other plans, it can be a real conundrum in trying to grieve, whilst organising the funeral as you hope the deceased would want it, paying the costs, collecting together any papers and valuables, understanding what money's where, why and how it can be accounted for, before seeking to gain probate. A very helpful guide, notes on how to deal with some of the paperwork, and what needs to be considered may be found here: https://www.gov.uk/when-someone-dies

As a first important point, we would always advocate making a suitable Will and keeping it up to date.

State Pension

A useful link to the Government website can be found here: https://www.gov.uk/death-spouse-benefits-tax-pension/pensions

The key points in this document for State Pension Benefits are as follows.

• State Pension

You need to be over State Pension age to claim extra payments from your husband, wife or civil partner's State Pension. What you get and how you claim will depend on whether you reached State Pension age before or after 6 April 2016. You would normally contact the Pension Service to check what you can claim.

• If you reached State Pension age before 6 April 2016

You'll get any State Pension based on your husband, wife or civil partner's National Insurance contribution when you claim your own pension. It is important to note that you will not get it if you remarry or form a new civil partnership before you reach State Pension age.

• If you reached State Pension age on or after 6 April 2016

You'll receive the 'new State Pension' and you may be able to inherit an extra payment on top of your pension.

Bereavement Support Payment

It is possible to be eligible for a Bereavement Support Payment from the State and more on this can be found here: https://www.gov.uk/bereavement-support-payment and details of what you might receive are here: https://www.gov.uk/bereavement-support-payment/what-youll-get

Chapters Financial is not responsible for the content of external websites.

Private Pensions

Private pensions are dealt with in different ways, and it is usually important to make a nomination on these fund values in the event of death to guide scheme trustees to the beneficiary you would want to nominate. These nominations can be updated, noting that we are aware that HMRC may investigate any pension nomination changes (or indeed any transfers) that occur within two years prior to death. HMRC will seek to ensure that the change was not arranged to avoid any tax on the pension benefits affected.

Under current rules, the value of your defined contribution pension plan remains outside your estate for Inheritance Tax purposes and would normally pass tax-free to your chosen beneficiary/beneficiaries on your death before your age of 75. After this time, the fund can pass to your beneficiaries and will be taxed at their marginal rate of income tax.

Final salary (defined benefit) pension benefits would normally provide a spouse's pension on death of the scheme member.

Summary

We can see from the links above that the State is not going to provide much. Therefore, making your own preparations and planning to protect loved ones is important in making sure that your legacy is as effective as possible, rather than the opposite.

If you would like to consider these opportunities, or ones more personal to your own circumstances a stage further, then please contact the team at Chapters Financial in Guildford. No individual advice is provided during the course of this blog.

Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899