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Pension death benefits complexity sees rise in adviser queries

11 November 2019

Pension death benefits are causing confusion for advisers, according to Curtis Banks, who said over half of its technical queries centred around this issue over the past month.

The SIPP provider said death benefits were an ongoing issue for advisers and not a one off spike, noting that while the rules can be “flexible and tax efficient”, they can also be “incredibly complex.”

Advisers’ queries covered a wide range of topics from when beneficiaries’ drawdown is available and minors inheriting death benefits to tax implications and lifetime allowance charges.

Curtis Banks said real life examples of questions included whether a beneficiary can pass unused funds onto their own beneficiaries when they die; if a beneficiary needs to be 55 to take income in beneficiaries’ drawdown and whether individuals can use a trust to give benefits to a spouse first then children thereafter.

It said clients were also asking for greater clarity from advisers on how they can use expressions of wishes forms to pass on their wealth in a way that they want to.

Jessica List, pensions technical manager (pictured), said: “The amount of queries received on the subject of the death benefit rules is disproportionately high. It is such a key area now, with so much complication within the rules and variation between different providers, that advisers want to be confident that they’ve covered all bases in each individual case.

“There are high profile examples in the national press of what can happen when things go wrong – from long drawn out disputes through to detrimental tax implications for the beneficiaries – and advisers don’t want to risk their clients being caught out. The current rules can be extremely generous for beneficiaries, but this level of complexity and consequences seem an unnecessarily high cost to pay.”

Kevin Blake, director of Ridgeways FP Ltd, called for reform: “Four years on from the introduction of pension freedoms the death benefit rules are still overly complicated for advisers, let alone our clients.  It is very easy for them to do something or forget to do something, such as not amending their expression of wishes if a beneficiary dies before them, which then causes problems when distributing the benefits. Reform of this system is badly needed.”

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