Advisers are having difficulty understanding the complex rules around death benefits, according to Curtis Banks, which said the majority of its technical enquiries are centring on this issue.
The self-invested personal pension provider said more than half of its technical queries received in the past month concerned death benefits.
It said this was an ongoing issue for advisers and not a one-off spike in queries.
The queries ranged from when beneficiaries’ drawdown is available and minors inheriting death benefits to tax implications in varying circumstances and lifetime allowance charges.
Advised clients were also asking for further clarity on how they can use expression of wish forms to pass on their wealth.
Queries to Curtis Banks included:
- Can a beneficiary pass unused funds onto their own beneficiaries when they die?
- Does a beneficiary need to be 55 to take income in beneficiaries’ drawdown?
- Is it still possible to use a trust to give benefits to a spouse first and then children afterwards?
Jessica List, pensions technical manager at Curtis Banks, said the amount of queries received on the subject was disproportionately high.
Ms List said: “It is such a key area now, with so much complication within the rules and variation between different providers, that advisers want to be confident that they’ve covered all bases in each individual case."
She added: “There are high profile examples of what can happen when things go wrong – from long drawn out disputes through to detrimental tax implications for the beneficiaries – and advisers don’t want to risk their clients being caught out.
“The current rules can be extremely generous for beneficiaries, but this level of complexity and consequences seem an unnecessarily high cost to pay.”
Kevin Blake, director at financial planners Ridgeways, said: “Four years on from the introduction of pension freedoms the death benefit rules are still overly complicated for advisers, let alone our clients.
“It is very easy for them to do something or forget to do something, such as not amending their expression of wishes if a beneficiary dies before them, which then causes problems when distributing the benefits.
“Reform of this system is badly needed.”
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