AJ Bell has seen a 350 per cent increase in the number of death benefit nominations updated and reviewed since the beginning of the new tax year.
Following recent changes to pension death benefits, the number of nominations that have been updated has surged in the past four months, compared to the same time period last year.
Nathan Long, head of corporate pension research at Hargreaves Lansdown, told FTAdviser that clients enquiring about death benefits and their nominated beneficiary had increased 133 per cent from 6 April to the same date this month, compared with the same time period 12 months earlier.
“Interestingly, with greater control over the benefits on death, we have also seen some drawdown members reduce their income payments to retain more in their pension,” he added.
Andy Zanelli, head of retirement planning at Axa Wealth, said that this comes as no surprise, adding that they have been actively encouraging advisers to review clients death benefit nominations, as part of the annual review process, for a number of years.
“For many clients their DC pension and any death in service benefits could well be the most significant asset, so why wouldn’t you take control of it? Many people fill in a nomination when they take out the original pension and forget about it, then years later it can cause real issues as their circumstances may have changed significantly.”
Historically, only dependants were able to receive death benefits as a pension, but new rules enable the payment of death benefits, as a flexi-access drawdown pension, to two new classes of beneficiaries – nominees and successors – in addition to dependants.
AJ Bell explained that a nominee is an individual who has been nominated as a beneficiary by the member. Where the deceased member had not made a nomination in their lifetime, the scheme administrator is able to nominate a beneficiary to be a nominee, provided the deceased member has no surviving dependants.
If the scheme administrator chooses not to pay benefits as per the deceased’s nomination, and there is a surviving dependant or a nomination in place, the chosen recipient will not be able to take the death benefits as a pension and only be able to receive them as a lump sum.
Flexi-access drawdown death benefits can only be paid to a dependant, nominee or successor, with the scheme administrator retaining the right to use their discretion to pay a lump sum to any beneficiary, whether nominated or not.
Billy Mackay, marketing director at the firm, stated that the new rules make it more important than ever to regularly review nominations at key life events and ensure funds are passed on in the most tax-efficient manner.
“We have had a huge amount of interest in our updated nomination form in light of the new rules and this, coupled with the sharp increase in the number of nominations reviewed and updated, makes it clear that many advisers are making this a priority.”
peter.walker@ft.com
