Is your Pension set up correctly? Don’t forget to name Pension beneficiaries as part of your investment, as this could end up being a very important part of being tax efficient and leaving a fuller financial legacy.
What is a Pension beneficiary?
A Pension beneficiary is the person who will receive the money remaining in your Pension upon your death. Your Pension is left to your beneficiary through your Expression of Wish.
An Expression of Wish is a statement to your Pension provider that lays out who will receive your Pension savings if you die before you have taken your money.
Your Pension sits outside of your estate, meaning your beneficiary won’t normally pay any inheritance tax on the money inherited through your Pension.
How to pick your Pension beneficiary?
Think about the people closest to you and those who you would trust with your financial legacy. Typically, this may be your spouse/civil partner or children, known as your dependents. But it could be anyone who you consider a close relationship.
Consider carefully who would be most suitable as your Pension beneficiary and have a conversation with them so they understand your wishes.
Why is naming a Pension beneficiary so important?
It is important to decide upon your beneficiaries as this will ensure your assets are distributed as you wish. Whatever the size of your pension, it’s your money, so it’s important to make sure you have made plans for it in case something happens, and you can’t personally benefit from that money, but you would like it to be shared with your loved ones. If you haven’t named beneficiaries, the government could dictate how your estate is divided and it may be less tax efficient for your loved ones.
Naming a Pension beneficiary is one of the key ways to do more with your money. Money left as an inheritance could be liable to inheritance tax, but money left in a Pension sits outside of your taxable estate. Your beneficiary wouldn’t normally pay inheritance tax, meaning more of your money can be passed on without the worry of tax diminishing its worth. On your death, your beneficiary can choose to take the remaining value as a lump sum or choose to leave your money invested in the Pension, continuing to grow its value and potentially extending your financial legacy into the future.
You can better protect your financial legacy by deciding upon beneficiaries today. It is a straightforward process to add beneficiaries to an expression of wish.
How to add a Pension beneficiary
It is typically quite easy to add a beneficiary, it could be as straightforward as logging into your account and accessing your Pension preferences. Call your Pension provider if you aren’t sure and they’ll be able to assist.
With True Potential, you can update your Expression of wish by simply logging into your True Potential app, selecting your Pension, viewing full details, and selecting Edit on the Expression of wish section. You can then provide the name and contact details for your chosen Pension beneficiary.
If you are in any doubt or want to make sure your beneficiaries are named correctly it could be worth speaking to a financial adviser. They’ll be able to assist with your beneficiaries and ensure your Pension is best suited to being tax efficient and appropriate to your goals.
Key things to consider today:
- Name a Pension beneficiary to ensure money left in your Pension is passed on to the appropriate person.
- Passing wealth on through a Pension is tax efficient, it usually isn’t liable to inheritance tax and your beneficiary can choose to keep the money invested and grow your financial legacy into the future.
- Naming a beneficiary is quick and easy. If you are with True Potential simply log into your True Potential app, select your Pension, view full details, and select Edit on the Expression of wish section.
- If you need any help or are unsure, speak with a financial adviser.
If you need financial advice or would like to open an account yourself click ‘Start Investing’ or call our dedicated team on 0191 625 0350.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. This article is not a personal recommendation or financial advice. Pension eligibility and tax rules apply. Tax is subject to an individual’s personal circumstances, and tax rules can change at any time. The Financial Conduct Authority does not regulate; will writing, tax advice and estate planning.
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