Pensions and Life Insurance Policies?

When making or reviewing your Will and your Inheritance Tax position, considering how you hold your pension and Life Insurance Policies is very important. At Johnson Astills, we provide a comprehensive Will writing service and place great importance on reviewing and fully understanding your assets/investments.

Pensions:

The main 2 types of pensions in the UK are private or public. Pensions in the public sector such as the basic old age pension or state pension are dependent on your National Insurance Contributions. It is unlikely these would provide a lump sum payment on your death.

Private pensions can be divided into occupational and personal and can be used as effective tax planning tools dependent on how they are set up.  We would strongly advise you speak to your pensions advisor or independent financial advisor  before making any financial decisions regarding any lump sums or death benefits.

Lump sum Death Benefits

Any lump sum death benefits that your Estate may may form part of your Estate for IHT purposes.

When setting up your pension, you will usually be asked to complete a nomination form from by the provider. This allows you to nominate a beneficiary/beneficiaries to receive any lump sum/death benefits.

If the nomination is ‘non-binding’ and the Trustees of the pension have the discretion as to whom they pay out to ,the death benefit/lump sum does not usually form part of the estate.

To clarify the position and check if any payment should be subject to IHT you should contact your pension provider or independent financial advisor

Life Insurance

Life insurance can also be an important tool in estate planning. These policies can be written in trust for a beneficiary/beneficiaries so that the proceeds do not form part of your Estate for IHT purposes when you die.  

However, depending what your life insurance policy was set up for, for example to pay off a mortgage, it may not always be the right thing to write your policy in trust; it may be best left to fall into your estate to ensure the mortgage is paid by your executors. As with pensions, we always recommend you take appropriate financial advice before making a decision.

Here at Johnson Astills we have specialist solicitors who can advise you in relation to preparing your Will. Johnson Astills are experts in Wills & Probate and if you would like to speak to a solicitor in the department please call us on 0116 255 4855 or 01509 610312.