In Focus: Retirement Income  

How to help clients pass on pension benefits

  • To gain a broad understanding of the role of the death benefit form
  • To be able to broach difficult conversations with clients.
  • To be able to explain the importance of the nomination form.
CPD
Approx.30min
How to help clients pass on pension benefits
 Tira Miroshnichenko via Pexels

Your clients will want you to discuss their pension death benefit nomination forms with them. They just might not know it yet.

There has been an increase in the number of people updating their wills since the pandemic hit, which is a positive trend.

But what about the many clients and prospective clients who don’t have their pension death benefit nominations up to date?

What is the best practice advice for planners on how to discuss this with clients and guide them through when to nominate, when to sort out legacy arrangements and how to work with solicitors?

This article aims to discuss some of the pitfalls and possible planning paths for clients.

What are the pitfalls of not having your pension death benefits nomination up to date?

The Law Society Gazette and the STEP Journal reported in 2020 that there had been an increase in people wanting to write or amend their wills at the start of Covid-19.

Indeed, some legal firms claimed a jump in demand of up to 76 per cent. And tells us that the pandemic has sharply focused people’s minds on making sure that their affairs are in order and that their wealth is transferred to the right beneficiaries should the worst happen. 

A pension makes cascading residual wealth to loved ones and future generations possible and can be very tax-efficient, because many pension funds fall outside the estate of the plan-holder on death and do not suffer from inheritance tax liabilities.

Making nominations is important to ensure that your wishes to leave a legacy are clear. Without a nomination, the benefit options on death are significantly reduced.

While arranging a will may be the first thought for many, equal consideration should be given to what happens to any pension savings on death. Pensions are a significant part of private wealth for many.

For example, the Office For National Statistics' latest Pension Wealth in Great Britain report revealed that 42 per cent of total wealth in Great Britain is held in private pensions.

In addition, accumulated pension savings are playing an increasing part in transferring wealth to future generations, with many savers now preserving their pension funds and taking an income from other savings first.

So as a financial planner, what am I looking to do for my clients?

Firstly, prior to ensuring that my clients achieve the best outcomes for their remaining funds on death, it is crucial for me that their wishes are identified, and everything is in place to get money in the right hands with the least amount of tax payable.

It is vital to ensure that a client has the correct type of pension scheme and that they are optimising their pension savings; only then do we check that their death benefit nominations accurately reflect their current wishes.