Sue’s story shows how vital it is to consider carefully who should inherit your pension death benefits. It also illustrates how using a specialist financial planner can help you avoid family conflict and financial hardship for loved ones – even in wealthy families.
Saving into a pension, along with other investments, to ensure a secure retirement is crucial. While doing this, it is also essential to complete a death benefit nomination form for each of your pensions. Although not binding, the forms indicates to the pension trustees who you would like to inherit your pension.
Sue was married to Paul and they had two children, aged 21 and 22. Paul ran a successful business and had funded his pension to a value of £1 million.
He naturally expected a comfortable retirement. He also expected to sell his business and concluded that Sue would be well looked after should he die. Paul therefore completed a death benefit nomination form that allocated 40% of his pension to Sue and 30% each to his children.
Sadly, Paul passed away before reaching retirement. Before he died, his business had started to struggle, and the Covid-19 lockdown had been the final straw. Sue had no income of her own apart from two buy-to-let properties and was still six years away from receiving her state pension.
On Paul’s death, she expected to receive his full pension and it was a shock to find out she would get only 40%, equating to £400,000 instead of £1 million. This meant Sue would not be able to afford the lifestyle she expected in retirement – as well as being alone and concerned about her long-term care.
She was also concerned that her children would be receiving £300,000 each at their age, especially as her eldest had previously had financial problems. She was worried that their dad’s hard-earned money would be frittered away. This caused a huge conflict between her and her children, and their relationship deteriorated to the point where the eldest child is not talking to her.
Paul could have done several things to avoid this situation.
First, it is important to communicate your wishes to your partner, including any nominations you have made and the reasons for making them. This ensures there are no further shocks at a time of great stress.
Second, it is essential to review your death benefit nominations regularly. Once Paul had recognised that his business was in trouble or that his children might not be responsible enough with the money, he should have completed new nomination forms.
It is important to discuss financial matters and review all your financial affairs regularly – from pensions to investments, wills, lasting powers of attorney and life policies in trust – with someone you can trust and seek specialist advice where necessary. Had Paul and Sue been consulting a financial planner regularly, the resulting hardship, stress, loss of control and conflict could have been avoided.
We live in uncertain times and it is important to get in touch with your family advisers. If you do not have an adviser and would like a clear understanding of your situation and options, please contact Blackstone Moregate on 020 3376 1444.
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