One question we are often asked is whether there is a need to include, in your Will, details of who is to inherit the deceased’s pension if they have not drawn funds or die before taking it.
The answer is usually straightforward; there is no point in including it. This may seem strange, but the explanation goes to the heart of the Will process. A Will can only distribute assets owned by the estate.
In most cases the death benefits of a pension fund are held in a discretionary trust under the control of the pension provider.
Therefore, it is not included in the estate of the deceased. Hopefully, the deceased would have completed a nomination request, which informs the pension company who they would like to benefit.
As with all letters of wishes, the nomination form is not legally binding to the pension fund. The fund trustees will give significant weight to it, but they will usually ask for further details (i.e., details of children or other family members), and they will usually request a copy of the Will.
This becomes particularly significant if the nomination was made a while ago or if, for example, there is a new relationship.
Our recommendation is for our clients to liaise with their pension providers to ensure that their nomination is up to date.
If the nomination is not to somebody obvious, or if it differs from the Will, then we encourage clients to explain particulars in a separate letter which we can store with the Will and release to the pension company should they request clarification.
From 6 April 2027, unused pension funds are to be subject to Inheritance Tax (IHT). This, however, does not affect the legal status of the benefit which will remain outside of the Estate for the purpose of distribution.
For information on our Will Writing Services via GH Wills Ltd please phone Barry Jefferd or Carol George on 01480 426500 or email wills@georgehay.co.uk.
GH Wills Ltd is a company controlled by the members of George Hay Partnership LLP.
