Intestacy and pension

[gingerpusscat]

Just a quick question regarding an intestate estate, where there is a surviving spouse and children: will the deceased's pension be ascribed a cash value, and form part of the assets to be potentially shared between the surviving spouse and any children? The pension in question is only transferable to the spouse.

If so, how will the cash value of the pension be calculated?

[Collaborate]

It all depends on what type of pension it is, and the rules of the scheme.

A final salary scheme will usually provide something to the widow, but may also act on a nomination by the deceased.

A money purchase scheme will often result in a pay out of the value of the investments - often but not always paid to the estate.

You really should be directing this question to the pension administrators.

[gingerpusscat]

Thank you Collaborate. I was under the impression that the answer to my question was dependant on rules surrounding intestacy, rather than rules unique to the pension itself. Thank you for clarifying.

[Collaborate]

It will only depend on the laws of intestacy if the pension rules provide that a payment is made to the estate. Most try to make payment out of the estate to avoid paying inheritance tax.

[cexuwaleozbu]

The pension will very likely have specific rules in place to prevent the payout forming any part of the estate. So the estate will be divided according to intestacy rules excluding the pension payout and then that sum will be added on top according to the pension rules.

It is very rare that a pension is structured to pay anything into the estate of the deceased - that would risk losing 40% of it in IHT immediately.

[gingerpusscat]

Thanks very much for these comments.