As a client of Alexander Peter, you'll understand that pensions can be an effective and tax-efficient way to save for your future.
Whether you have a workplace pension, a personal pension or SIPP (self-invested personal pension) making contributions into any type of pension is a sensible option for many people.
However, one thing you may not have considered is what will happen to your pension savings when you die.
If you want to make sure that your pension benefits are passed on to your loved ones, it’s important that you complete your expression of wish form.
Put simply, in the event of your passing, an expression of wish form will nominate beneficiaries to receive your pension benefits. Despite the importance of completing an expression of wish form, a report in MoneyAge revealed that more than 72% of UK adults have failed to do so.
Read on to find out why completing your expression of wish form is so important and can help give you and your family that peace of mind you need.
An expression of wish form allows you to specify who receives your pension benefits when you die
Essentially, an expression of wish form is a type of “pension will” that enables you to choose the beneficiaries of your pension in the event of you dying.
The trustees of your pension scheme will use this form to make decisions on how best to distribute your pension savings, typically using your wishes to make the decision. Your pension provider will be able to distribute your funds to your nominated beneficiaries as soon as possible if you were to die.
Filling out the form is fairly straightforward – simply enter the details of your chosen beneficiaries and then return it to your pension provider, who will keep hold of it for you.
Of course, as an expat living abroad, you will need to be aware of how that different countries have different rules that may affect your pension benefits and how they are distributed in the event of your death.
For example, if you are living and working in the US, you will be asked to name a beneficiary when you initially enrol in your employer’s pension plan.
How the beneficiary will be paid out will depend on the type of pension plan you sign up to, with some plans paying out a lump sum and others issuing payments over a set period of time.
The situation is similar for expats living in Australia. While most pensions allow you to choose your beneficiaries, some rules can apply, so it may be worth checking with your pension provider for further information.
The mechanisms of how to nominate a beneficiary will vary according to where you live and where your pension is held.
If you haven’t nominated someone to receive your pension in the event of your death, we can help you understand what you need to do.
Passing on your pension can offer tax-efficient benefits
Because pension assets aren’t typically included in the value of an estate, it’s possible to pass on your funds without your loved ones incurring an Inheritance Tax (IHT) charge on them.
Of course, IHT liability rules differ from country to country, so make sure that you’re aware of how this may affect you, your pension assets, and your loved ones.
Depending on your financial plan and individual circumstances, using your non-pension assets to provide your retirement income first and leaving your pension untouched could be worthwhile.
Doing so could allow you to tax-efficiently save and invest your money throughout your working life. You could then potentially pass these funds on to your beneficiaries without them having to worry about paying IHT.
Without an expression of wish form, your funds could be paid to unintended beneficiaries
If an expression of wish form hasn’t been completed, the rules dictate that pension funds are passed on to your “financial dependants”. This may see your savings being distributed in ways that don’t align with your wishes.
An example of this would be your pension funds being passed on to an ex-partner, rather than your most recent one.
FTAdviser reported on research from Royal London highlighting that around 773,000 people in the 55-64 age bracket have been married but are now in new relationships after divorcing.
With this in mind, it’s important to make sure that your expression of wish form has been correctly filled out and is kept up to date if circumstances change.
A correctly filled out expression of wish form could enable you to state that if your spouse is unable to receive the funds, the money could be paid equally to your children. This would enable your children to receive any pension death benefits in the most appropriate and tax-efficient way and give you complete control over where it ends up.
Working with a financial adviser can help
Whenever you’re unsure of the best way forward when it comes to retirement planning as an expat, speaking with a financial planner could be beneficial.
They can help you define exactly what your financial plan involves, identify the most suitable products for you, and help you understand what is needed to protect your wealth and help your loved ones in the future.
Additionally, they will help you understand how pension rules in the country you are currently residing in might affect how your pension benefits are distributed and can be claimed by loved ones upon your death.
Get in touch
If you are looking to ensure that your assets are passed on to your loved ones correctly and that your wishes are followed, please get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
