Clare Stinton, head of workplace saving analysis, Hargreaves Lansdown: “Pensions are currently one of the most tax-friendly ways to pass on wealth, so you’d think most people would be quick to make sure their hard-earned cash ends up in the right hands. Yet 40% of people over 60 haven’t nominated who they want to inherit their pension when they’re gone.
It’s a risky oversight for several reasons. First and foremost, not updating your expression of wish form after key life events – such as divorce – may lead to unnecessary delays in loved ones receiving money when you die. It could even mean an ex-partner gets the benefit rather than a current one. This can lead to all kinds of financial issues while the situation gets sorted out.
The other issue is the government’s decision to make unspent defined contribution pensions subject to inheritance tax from April 2027. In this case, completing an expression of wish is a small task that could make a big difference – and potentially save your family thousands of pounds.
Why timing matters
Most people will choose to nominate their spouse or civil partner as the main beneficiary, because transfers between spouses are usually exempt from IHT. Under the proposed changes, passing away after 2027 could land younger generations with a potentially hefty tax bill if they are named on the EOW.
On the other hand, if you’re older, or in poor health and unlikely to live to see April 2027, you can take advantage of the current more generous rules, and pass money to children or grandchildren tax efficiently. This is only an option if your surviving partner has enough to be financially secure without your pension. Should you live beyond the rule change, you can change your instruction – just set up a reminder so this small but mighty task doesn’t slip through the cracks.
It’s all about making the right choice for your situation – and revisiting it over time. An outdated nomination risks the money ending up in the wrong hands. Marriage, divorce, new loved ones, or changes to your health, as well as new tax rules, are all reasons to review your nomination. If unsure about what’s right for you, seek financial advice for peace of mind. Your pension could be one of the largest assets you leave behind - don’t leave where it ends up to chance.”
What you need to do
An expression of wish form - sometimes called beneficiary nomination - tells your pension provider who you want to inherit your pot when you die. It’s not legally binding, but it’s the clearest way to ensure your wishes are followed. It only takes a few minutes to complete (about as long as making a cuppa), and most providers enable you to complete online. If you have multiple pensions across different providers, you’ll need to place your instruction with each one – but again, it’s quick and easy.
This is more than tick box life admin. Failing to complete or update your nomination could leave your loved ones facing delays in accessing funds, and with the proposed new rules, possibly also land them with a tax bill that could have been avoided. Whether you’re in great health or facing uncertainty, now is the time to review who you’ve nominated – and why.”
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