Inheriting private pension

[Sparkledr]

My aunt passed away at the beginning of the year. 6 weeks ago my aunts sister contacted me to say that I had been named as a beneficiary on her private pension, along with 2 cousins. She took my details, bank details, email etc. I have heard nothing since. I loathe to chase up my aunt who is grieving her sister and dealing with probate. Does anyone have any idea how this progresses from here? My aunt was in her 60s and not claiming her pension before death. No children.

@Sparkledr I imagine the executors are dealing with the death and will apply for probate. They cannot distribute anything before probate. 6 weeks is nothing. I don’t see why you cannot ask what happens next though as you were surprised and delighted to have been named as a beneficiary. The pension fund also has to release the funds to the executors after their internal processes.

@TizerorFizz thank you for your reply. I was of the understanding that a private pension wasn't part of the estate therefore doesn't go through probate? Maybe I'm wrong?

Yep the pension company might need probate before paying out. It will depend on their risk appetite and the legalities though - some companies will pay out straight away or on sight of the will if the pension is below a certain amount for example. If the pension is a large amount they’re more likely to need to see the grant of probate before they pay out, and then you’re in the lap of the HMRC gods! It could take months/a year.

No harm in asking the executors what the next steps are but don’t be surprised if they don’t know much either.

Everything the person owns makes up their estate. The ‘private’ label doesn’t mean anything in that sense.

@gardendream sorry that should just read as I didn't think a pension was part of the estate. Private or not. I'm aware probate takes 6 months but just didn't think pension was part of a person's estate. Like I said I'm clearly wrong! Thank you all for clarification!

@gardendream sorry I sent that too soon. I see there's no straightforward answer! I appreciate your knowledge!

I worked in the pensions industry for 20 years and I don't believe pensions are included in the estate and they are not subject to inheritance tax. Although I could be wrong as I've been out of it for many years.

sorry OP the advice you have above is wrong. Pensions are not part of the estate at all. They’re not affected by probate and the executors have no control.
the reason they aren’t is that private pensions are technically in a trust and the pension holder can’t decide what happens when they die. What they can do is nominate beneficiaries. There will be a committee at the pension company who will make the decision. This will be based on the information they have. This includes the nominated beneficiaries and any other info. For example they might want to see the will to make sure there aren’t children or spouses who aren’t provided for. They’d also consider a letter of wishes from the deceased. Usually this takes a couple of months. Then you can decide what to do with the money. The options depend on the age of the deceased.
good luck. X

Sorry for your loss.

A private pension is outside of the estate and the provider should not need a grant of probate to distribute.

Usually the provider will have an expression of wish from the person owning the pension and distribute accordingly unless there this has not been updated and the provider may then do some investigation. The provider is usually the trustee and had the final decision on distribution. It would be very unusual not to follow an expression of wish form.

As your aunt was younger than 75 when she passed then the beneficiaries can receive the money tax free.

Ask the executor of the will who the provider is or find out if your aunt had a financial advisor.

When my husband died, still in work, it took quite a few months to sort out. It was backdated though. Everything to do with death seems to take an age, though this was at the height of the first wave of the pandemic. I wouldn’t worry too much yet, maybe leave it another month or so then contact.

What happens if no beneficiaries are names in a pension? Who sorts it out if it's not part of the estate?

I pay out pensions on death. If there are several beneficiaries we can't pay out until we have everything we need from all beneficiaries. That can take a long time!

It clearly varies a lot between pension companies!

@Malarandras I'm very sorry for your loss. X

Thank you all for your replies. I appreciate the insight and see there is no clear time frame as is usually the way with such matters after death.

@GlenPonder I suppose maybe the pension provider contacts a next of kin? No idea.

It is then up to the trustees of the pension fund to decide who gets the money. Even if beneficiaries have been named, they are not bound by that.

Pension doesn't form part of the estate but that doesn't mean it won't take forever. We had to deal with 3 pension companies for my fils death. 1 took 12 weeks and all sorted. Another took 7 months. The third took just over 18 months.

If it's aegon I wouldn't expect any money this year

Probate wasn't strictly necessary for DH's estate but the pension provider is refusing to pay out without it. Frustrating as I'm both executor and sole beneficiary.

I have had this after the recent unexpected death of my sister aged 60. I am one of her executors. She had two private defined contribution pensions and death in service life assurance. All fall outside the estate. Payments will be in accordance with her expression of wishes in each case but are at the discretion of the trustees. Because she was under 75 at the time of death there is no IHT or income tax to pay on the pension payments. There is none on the life assurance policy either. If she had been over 75 there would have been income tax to pay on the pension payments but no IHT. One pension (Aviva) has already paid out and the other (Aegon) has not yet.

I have a fund and have named three beneficiaries and allocated percentages but was told that would simply mean all three would be "in the room" when it comes to distribution, so they could alter it (presumably by agreeing so between them).

I was also told that the younger ones might choose to keep it in a pension fund rather than have the money. Don't know how that works but I remember it because my daughter doesn't have much provision yet and - although hopefully it wouldn't happen- it would be a nice thing for her to.inherit.

Nope. A pension is not considered part of the estate for IHT purposes, and the names of the beneficiaries are lodged with the pension provider for disbursement, not part of the Will.

No, @gardendream , a pension is never part of the estate. See the explanation from @Onekidnoclue above. It isn’t pension company specific.

Thank you. 100% accurate for DC pensions

DB pensions, the trustees review the wishes of the deceased, they may or may not have a policy on who gets entitlement. It’s usually spouse or dependents under a certain age and only a proportion. there’s usually a death benefit lump sum too, but not always and can depend if they were an active or deferred member.

both are outside the estate for IHT purposes, before age 75.

don’t know about probate, I guess some companies may want every box ticked, but I’ve seen it paid in a matter of weeks, and sometimes the death benefit paid in days. I guess theres always an other extreme.

both are outside the estate for IHT purposes, before age 75.

And also if the pension holder dies after 75. In that case the pension is taxed as income. Not added to the estate for IHT purposes.

Pensions are dealt with by the company and they will go by expression of wish, not necessarily the will, so if there is a discrepency it can take a long time (and legal action) to sort out - especially if relatives are not considered immediate family. I’d suggest calling the company and asking a general question about what the timescales should be.