WHILE almost all of the media spotlight on the new pension changes introduced in April this year was concentrated on the fact that people could, in theory, cash in their pension pots (57,000 people have exercised this option to date), the real big changes are, in fact, to be found in how your pension is treated on death. Now, as is usual with pensions, this can get really complicated so try and bear with me as I attempt to bring some clarity to the subject.

Let me start by recapping the old rules and looking at the types of pensions that might not allow changes to nominees. There are a number of factors which affect death benefit provision on the member's death. These include whether or not the member was in receipt of their benefits when they died; the type of pension the member was in receipt of and these could include S226 Retirement Annuity Contracts, S32 Buy Outs, FSAVCs, Stakeholder and GPP/Workplace arrangements; and the age of the member at date of death.

HMRC have a definition of the word 'dependant' and an individual must meet this in order to be paid a dependants pension.

If the member dies after taking their benefits or after the age of 75, there will be a tax charge of 55 per cent on any lump sum death benefits paid.

Inheritance tax is not usually payable on lump sum death benefits but, where the scheme administrator has no discretion over the payment, there would be a liability.

So in short, there were not a lot of options available to you on how you wished your pension to be paid out on your death and who it was paid out to. So when I speak about wrong pension there is a chance that you may not have the option to change who gets your benefits from your defined contribution pension pot. If you are in a defined benefit (or final salary) pension then there are more restrictions on who qualifies as a beneficiary. If you have divorced from a previous spouse then it may be worth looking at this because there is every chance she is still entitled to the death benefits as she was nominated at its outset.

With the new changes, however, you can nominate whoever you like to receive your pension on your death. This could be your spouse, children or grandchildren, or you can nominate someone unrelated to you if you wish. You can also leave some, or all, of your fund to charity.

You do not need to leave the benefits to just one person, you can split them in whatever proportion you like, so each of your beneficiaries receives a share of your fund.

There is much more to this subject than I have room for in this column (particularly surrounding the age 75) but hopefully I’ve covered enough to make you check your pensions and seek advice from a qualified adviser.

You can get in touch with Billy by calling his freephone number: 0800 321 3508. Or you can reach him via the website, www.williamgeorge.info, where there is a contact page, or email him directly: w.george@ifswm.com.