This question comes up time and time again and it is hardly surprising because the government continue to tinker with the rules. Generally speaking, the rules on death benefits are improving and the diagram below displays the current position.Of course we fully appreciate most people’s main concern is to ensure their loved ones have financial security should the worst happen. For some, a lump sum payment of a large pension fund can have some serious longer-term inheritance tax issues and we think it is therefore important to know that a minor amendment to where we direct the potential death benefits can offer some tax saving opportunities.It’s commonplace for a husband to nominate his wife to receive 100% of his pension fund on death. This is fine, but the fund on his death, ultimately falls into his wife’s estate and potentially could create an even larger IHT issue on her estate on death. However a minor tweak to the husband’s nomination whilst he is alive, whereby for example, he directs 98% of the fund to his wife and 1% to each of his two children can open up a window for the wife to consider more wide ranging options on her husband’s death and save some tax – which is always a good thing !Feel free to contact us for more information.

By Philip Harper  |  January 2019