“A clear nomination also allows the benefits to be paid out relatively quickly, which is extremely helpful if other assets are tied up in probate.”
Clients should also be advised to carefully consider who should receive the benefits, says Tait. “Most clients automatically want to pass their pension to their husband or wife, but this is often not the most tax-efficient strategy.
“Spousal transfers are exempt from IHT in any case, so it could make sense to pass the pension benefits to someone else who doesn’t benefit from this exemption.
“Once a pensioner reaches age 75, pension death benefits will be subject to income tax in the hands of the recipient. It could therefore be beneficial at this stage to revise the nomination, so the pension is passed down to younger family members who pay little or no income tax, instead of someone who would pay higher or additional rate tax.”
Chloe Cheung is a senior features writer at FTAdviser
