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NEST, the ‘Not for Profit’ Work place pension provider, is at last introducing a new option to give its members greater choice about their death benefits which will allow for the inheritance tax freedoms that most other pensions receive.
Nest members can now either nominate a beneficiary or opt in to discretionary decision-making by completing an Expression of Wish form.
Under the Expression of Wish option, Nest members can opt in to discretionary decision-making by completing a simple form indicating who they would like their pension paid to after their death. Following their death, Nest will then decide whether or not to pay their pension pot to the beneficiaries listed on their form – taking changes to the members’ personal circumstances into consideration. If Nest decides not to pay to those beneficiaries, the pot will usually be paid to the member’s estate. This exercise of discretion means the member’s pension pot will not usually be considered part of their estate for Inheritance Tax purposes.
Previously, members were only able to nominate a beneficiary, with the result that their pot would be paid to that beneficiary as long as they were alive and traceable at the date of death. In this case, the members’ pension pot would usually be considered to form part of their estate for inheritance tax purposes.
Members will still be able to make a nomination, if they feel this is the best choice for them. They can change to an Expression of Wish at any point, but once they do this, they will no longer be able to make a nomination. They can add or edit Expression of Wish beneficiaries at any point.
The changing Nest member demographic and increasing value of their pension pots, driven for example by the lifting of the restrictions on transfers and contributions in 2017, means that it’s now more likely members’ pots could have an impact on their estate for inheritance tax purposes. Nest members should therefore carefully consider whether they want to nominate a beneficiary or make an expression of wish as this choice will have implications for how their pension pot will be dealt with upon death.
It is an easy online process and Nest has worked with specialist agencies to make sure the communications are simple, easy to understand, and accessible. Nest encourages their members to log into their accounts and choose the option that is right for their circumstances. They should also consider seeking professional advice before making a decision.
Employers who are considering a change to their Work Place Pension arrangements should contact one of our Group Pension Specialists who will be able to advise on the best options
Workplace Pensions are regulated by The Pensions Regulator. The Financial Conduct Authority does not regulate estate planning.