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Really hoping to be put in touch with a professional that can help me on this one as I have little trust in the solicitors or the company concerned getting it right.
Firstly is there anyway that the pension of a deceased if held in a corporate pension fund could be kept by the pension fund rather than paid to the estate?
Secondly, assuming that the pension fund is paid to the estate would it always be considered as discretionary for inheritance tax purposes, or could it be non discretionary & therefore subject to IHT. Thanks
What type of pension are you talking about?
DB - there will be defined death benefits (which might be defined as zero!)
DC - there will be a pot of money which will be outside of IHT calculation
(not a financial advisor!)
Firstly is there anyway that the pension of a deceased if held in a corporate pension fund could be kept by the pension fund rather than paid to the estate?
Yes, if it's defined benefit with no allowance for a spouse then if the owner dies, the pension dies with him/her.
Similar to an annuity with no spousal benefit, you could buy an annuity with your entire pot, pop your clogs the next day and the money has gone...
It seems harsh, but it allows for a more generous payout as those who live longer are subsidised by those who die before their 'expected date'.
There is a pot of some £200k but as I understand it that is only outside of IHT if the payment is "discretionary" ie the trustees have some flexibility on the payout. The issue with this one is the "corporate" part of it as the company he had worked for are the policy holders rather than being a personal pension, so the company directors have to complete the claims forms & they happen to be the deceased estranged family members & I'm not convinced the solicitors are fully conversant, hence the request 🫣
so the company directors have to complete the claims forms & they happen to be the deceased estranged family members
That would appear to be a rather large conflict of interest...
@footflaps as above the pension company have issued claim form to his employers so I assume there is monies to be paid out (employers mistakenly forwarded form to me as executor) but forms are very confusing/contradictory.
That would appear to be a rather large conflict of interest…
You are telling me, the joy of families.
No annuity had been bought, deceased was in his 50's & living off a trust fund that was going to be paid until he reached retirement age..
as above the pension company have issued claim form to his employers so I assume there is monies to be paid out (employers mistakenly forwarded form to me as executor) but forms are very confusing/contradictory.
Every pension scheme will have slightly different rules and forms, and it doesn't surprise me that they aren't very straightforward, it's an insanely complex subject. E.g. I had a company pension that spent nearly 15 years in continual legal battles in Canadian courts before finally being resolved and then after that the UK branch couldn't work out the settlements as there was a pending UK high court case which could affect the divying up rules, so there was another 5 year wait on this side of the pond! So, nearly 20 years to work out what I was owed!! Actually, I think I just took a reduced settlement, as they still hadn't resolved the UK bit, but I could access something like 90% of my pot without waiting any longer, but had to agree to give up any claim on the rest...
Thanks @footflaps not really what I wanted to hear & why I realise I needed some expert input I guess.
The answer to both questions in the opening post is that it depends on the Scheme rules, but it would be very unusual for a death benefit not to be discretionary.
You refer to a 'pot' which implies a defined contribution scheme from which the benefit now payable would normally be the fund in respect of the deceased.
The pension scheme will (well, should) have formal rules which set out to whom the benefit can be paid. As you suggest, if the rules direct it be paid to the estate, it is not discretionary, but that would be a very unusual situation. Normally the rules define who the potential beneficiaries are and the trustee/s (from your description the company is the sole trustee) must select one or more people meeting that definition to receive the benefit. Note that if the benefit is not paid within 2 years it also becomes taxable (as the beneficiaries' income).
As executor of the estate (the estate normally being a potential beneficiary), you should be able to get a copy of the scheme rules - and requesting them might focus the directors' attention on their legal responsibilities.
The trustees are not required to justify their decision, or even to document their reasons, but you can appeal if you believe it was wrongly taken (eg they did not consider someone they should have or paid to someone outside the rules) - its not a quick process, however and the Ombudsman can normally only refer back to the trustees to remake the decision rather than replace their decision.
@pyranha thank you so much for your response, at this stage I'm not sure if the company directors are acting out of ignorance or malice, but I suspect the former. Would the pension rules be the rules of the pension provider or could the company who hold the corporate policy have their own rules.
Are you able to DM me as there are believe it or not other complications.