Nine in Ten UK Pension holders in dark over Death Benefits
Only 7% of people with Pensions from UK employment know how their Pension funds will be treated in the event of their death, with only 4% understanding how those funds will be taxed.
New research, by a Pension Trustee, has prompted the firm to write toA�Philip Hammond, Chancellor of the Exchequer, seeking reform. Most policyholders assume the funds will automatically go to their nominated beneficiary, without realising that their Pension provider currently has discretion to alter that.
In the new era of pension freedoms, this control should remain with the Pension holder, not the Pension provider. A substantial number of people are affected by this issue,A�with nine million people having contributed to Personal Pensions in the UK.
Of these figures, therefore, this would mean that about 8.4 million UK consumers dona��t understand the death benefit rules introduced as part of the Pension freedoms, especially those who are now expats living outside the UK.
985 UK adults who have a personal pension were interviewed for this survey. They were asked whether they know what will happen to their Pension fund upon their death. The research showed that only 7% can correctly identify that their Pension provider will decide who it goes to, taking into account their nominated beneficiaries.
Half (51%) assume it will automatically go to the person they have nominated as the beneficiary of their Pension.A�Some 14% think it will form part of their estate and be distributed as per their Will, and a quarter (25%) admitted they dona��t know.
When it comes to how their Pension will be taxed upon their death, only 4% of people questioned correctly identified that it would be tax free if they die before age 75 and subject to income tax rate of the beneficiary if I they die post 75. A majority (58%) admitted outright that they dona��t know while some others thought it would be subject to the main forms of taxation such as income tax (10%) or Inheritance Tax (14%).A� 11% thought it would be tax free!
Additionally, only one in five British adults with Personal Pensions (18%) have nominated who they would like to receive their Pension on death within the last three years. A third (32%) have never nominated a beneficiary and another third (35%) nominated their beneficiary over five years ago. Family circumstances change regularly a�� there are around two million life events that could affect these nominations such as births, deaths, marriages and divorces every year in the UK a�� and so the majority of these nominations are likely to be out of date.
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