Do SIPPS include free life insurance?

[Bouleversee]

I'm glad I initiated this thread as it sounds as though a lot of people need to clarify the situation and act accordingly. I'll see how much my sprogs found out before opening their SIPPs. Unfortunately, I don't have a SIPP, only ISAs and other IHT taxable assets and a fixed rate annuity which will die with me. I must spend less time on watching my investments and more on spending and gifting them.

[Dod101]

I'm glad I initiated this thread as it sounds as though a lot of people need to clarify the situation and act accordingly. I'll see how much my sprogs found out before opening their SIPPs. Unfortunately, I don't have a SIPP, only ISAs and other IHT taxable assets and a fixed rate annuity which will die with me. I must spend less time on watching my investments and more on spending and gifting them.

I think it is all pretty clear except for the taxation related to the second generation beneficiaries and that is at least for now not a concern for most holders. It is though a complicated subject and the government seems unable to stop making changes to the rules.

Dod

[PinkDalek]

There are plenty of basic guides available online. This one from A J Bell (YouInvest):

https://www.youinvest.co.uk/sites/default/files/useful-forms/AJBYI_SIPP_Guide_to_accessing_your_pension.pdf

[PinkDalek]

[I'll see how much my sprogs found out before opening their SIPPs. ...

In so far as my own (mini) SIPP is concerned, A J Bell's Application summary had a section entitled Nomination of beneficiaries, followed by the narrative Your nominated beneficiaries are the individuals or trusts to whom you wish the Scheme Administrator to consider making payment of any death benefits. Please note that the ultimate decision remains with the Scheme Administrator.

[Chrysalis]

I'm glad I initiated this thread as it sounds as though a lot of people need to clarify the situation and act accordingly. I'll see how much my sprogs found out before opening their SIPPs. Unfortunately, I don't have a SIPP, only ISAs and other IHT taxable assets and a fixed rate annuity which will die with me. I must spend less time on watching my investments and more on spending and gifting them.

I think it is all pretty clear except for the taxation related to the second generation beneficiaries and that is at least for now not a concern for most holders. It is though a complicated subject and the government seems unable to stop making changes to the rules.

Dod

Well, I have explained that the taxation for second generation beneficiaries is exactly the same as for the first beneficiary, but don’t take my word for it, see this https://adviser.royallondon.com/technic ... -drawdown/

[Dod101]

Well, I have explained that the taxation for second generation beneficiaries is exactly the same as for the first beneficiary, but don’t take my word for it, see this https://adviser.royallondon.com/technic ... -drawdown/

Thank you, Chrysalis. For those that can afford to, the SIPP has now morphed into an IHT free family vehicle for preserving wealth. The trouble is though that no new capital can be added to it (it would seem) after the death of the original owner. Investment gains can of course roll up in it tax free. I wonder how valuable this will really prove to be? I cannot help thinking that some grandchild or other could have a ball on the proceeds.

Dod

[swill453]

For those that can afford to, the SIPP has now morphed into an IHT free family vehicle for preserving wealth. The trouble is though that no new capital can be added to it (it would seem) after the death of the original owner. Investment gains can of course roll up in it tax free. I wonder how valuable this will really prove to be? I cannot help thinking that some grandchild or other could have a ball on the proceeds.

I don't see the inability to add to an inherited SIPP as any kind of "trouble". The inheritee is of course free to contribute to their own SIPP if they so wish.

As far as a grandchild blowing it all, isn't that the potential fate of most inheritances?

Scott.

[Chrysalis]

The person who inherited the pension can, of course, build up their own pension (subject to contribution limits of course) and pass that, along with the inherited pension on to whoever.

And so on and so on.

So several generation from now, someone may have many inherited pensions from many different family members.

It wasn't so long ago there was compulsory annuity purchase at age 75.

Although, of course, the problem for the vast majority is having enough in the pension pot to support one generation of retirees!

[Dod101]

I guess the answer if you want to benefit successive generations, is to ensure that the beneficiary never draws more than the natural yield from the SIPP and lets the capital roll up. That is in fact what I have been doing for the last few years. I took my 25% tax free capital when I moved house some years back and since then have just let my relatively small SIPP roll on.

This thread has surely been a very interesting and, for me at least, educational expose of the taxation of a SIPP. Thanks to all who have contributed.

Dod

[swill453]

I think the limit to my SIPP "inheritance" planning will be my expression of wish form. What the recipients do with it, and whether any subsequent generations should benefit, is of no concern to me whatsoever.

Scott.

[Dod101]

I think the limit to my SIPP "inheritance" planning will be my expression of wish form. What the recipients do with it, and whether any subsequent generations should benefit, is of no concern to me whatsoever.

Scott.

I have not been acting as I have with any intention of benefiting future generations; it is just that I have not needed the money and have just left it there, drawing the dividends once a year. I have always seen it as a nice fall back if I need capital at some point.

I am afraid with what I have in my SIPP my two kids who are currently the named beneficiaries are certainly not going to grow rich on the proceeds.

Dod

[AJC5001]

Well, I have explained that the taxation for second generation beneficiaries is exactly the same as for the first beneficiary, but don’t take my word for it, see this https://adviser.royallondon.com/technic ... -drawdown/

Thank you, Chrysalis. For those that can afford to, the SIPP has now morphed into an IHT free family vehicle for preserving wealth. The trouble is though that no new capital can be added to it (it would seem) after the death of the original owner. Investment gains can of course roll up in it tax free. I wonder how valuable this will really prove to be? I cannot help thinking that some grandchild or other could have a ball on the proceeds.

Dod

If there is more than one beneficiary, does the fund get split so that each one can make their own decisions about withdrawals and what it is invested in? If so, can the fund be moved to a different Trustee company?

Adrian

[mc2fool]

I have recently gone through this chapter and verse. Most SIPPs are under the pension rules and the assets are thus held by the managers as Trustees, giving them discretion as to where to pay the proceeds on death. That is why you are encouraged to give them a Letter of Wishes, and cannot give them an instruction. They can still ignore your wishes if they deem it appropriate but in practice hardly ever will.

BTW, do you, or anyone else, know under what circumstances they may deem it appropriate to ignore your wishes? And if they do, what actions can be brought?

I mean, assuming unexceptional wishes, like a brother or an established UK registered charity (not an Afgan based bin Laden revenge fund ).

[swill453]

BTW, do you, or anyone else, know under what circumstances they may deem it appropriate to ignore your wishes? And if they do, what actions can be brought?

I mean, assuming unexceptional wishes, like a brother or an established UK registered charity (not an Afgan based bin Laden revenge fund ).

I'd imagine it could be something like - your expression of wish says leave it all to your spouse (by name), but you've subsequently divorced and are cohabiting with someone else. And neglected to update the expression of wishes.

If the circumstances were made known to the trustees I'd guess they might override the wishes and give the money to the cohabitee.

Scott.

[Chrysalis]

I have recently gone through this chapter and verse. Most SIPPs are under the pension rules and the assets are thus held by the managers as Trustees, giving them discretion as to where to pay the proceeds on death. That is why you are encouraged to give them a Letter of Wishes, and cannot give them an instruction. They can still ignore your wishes if they deem it appropriate but in practice hardly ever will.

BTW, do you, or anyone else, know under what circumstances they may deem it appropriate to ignore your wishes? And if they do, what actions can be brought?

I mean, assuming unexceptional wishes, like a brother or an established UK registered charity (not an Afgan based bin Laden revenge fund ).

Here’s an example where the nomination was overridden:
https://www.pensions-ombudsman.org.uk/w ... k00663.doc

And more interesting case studies:
https://www.allenovery.com/global/-/med ... nefits.pdf

I would imagine that most such cases would be where the nomination has been away from a dependent or spouse. The trustees would need to consider the needs of any dependents.

In Scott’s case, I am not sure. I think if the new partner was a spouse it would be clear, but if it was a choice between a new partner and a non-yet-divorced spouse it could go either way I’d think. And the spouse or ex spouse might raise a complaint.

[Dod101]

I think also there might be a conflict if the Will said something and the Expression of Wishes said something else. At least that would give the trustees something to think about.

Dod

[Chrysalis]

I think also there might be a conflict if the Will said something and the Expression of Wishes said something else. At least that would give the trustees something to think about.

Dod

Indeed. It makes you think you should include a letter with your will reinforcing your nomination if it’s different.

[swill453]

Trustees will always look for an existing will and also to protect a spouse and young children first.

Really? I would have expected that if there was an Expression of Wishes, and nobody was disputing it, then they would have no reason even to want to see a will.

Scott.

[Dod101]

I have no experience of this so will bow out but I would have thought that trustees would look no further than a letter of wishes.

Dod

[PinkDalek]

I have no experience of this so will bow out but I would have thought that trustees would look no further than a letter of wishes.

I’m not sure if anyone has read the links provided by Chrysalis but I found them of interest.