Pensions don’t automatically follow your will. Most defined contribution pensions (the kind you build through personal or workplace plans) pass on according to your nominated beneficiary form, not your estate.
If you haven’t nominated anyone, or your nomination is out of date, the pension provider may use discretion to decide where the money goes. That could delay things and lead to outcomes you didn’t intend.
For defined benefit pensions (rare these days), rules differ and often include a dependent’s pension. But even then, nominations still matter. And here’s where the plot thickens: tax!
The 2027 Rule Change That Changes Everything
Until recently, unused pension funds usually sat outside your estate for inheritance tax (IHT) purposes. That’s one reason pensions became a go-to vehicle for wealth preservation.
But from April 2027, unused pension funds will be included in IHT calculations when passed on after death, a major shift. For families with large pots, this could mean thousands lost to tax if no planning is in place.
It doesn’t just affect the ultra-wealthy either. With property and pensions combined, many households may now find themselves brushing up against IHT thresholds, even if they didn’t think they were.
Why Your Beneficiary Nomination Matters
Think your will is enough? It’s not. Pension providers rely on the nomination form you filled out, or didn’t, sometimes years ago. And unlike a will, it’s not legally binding, but it carries significant weight in how decisions are made.
That means if you’ve divorced, remarried, had kids, or simply changed your mind about who should receive what, your pension could go to the wrong person, or be held up in an administrative limbo.
It’s also a frequent blind spot. We regularly speak with clients who haven’t updated theirs in over a decade.
How to Recheck and Update It
It’s surprisingly simple:
- Log into your pension provider’s portal or call them directly.
- Check who is currently nominated.
- Update the form if anything has changed: relationship status, number of beneficiaries, or their contact details.
- Keep a copy and let your adviser know you’ve updated it.
This small task can make a huge difference to your loved ones, financially and emotionally.
Final Thought: Peace of Mind Beats Paperwork
One of your biggest assets? Your pension. So it is super important not to let a forgotten form hinder everything you’ve worked very hard for. The changes for 2027 is a big wake up call for many of us, so now is your window to get ahead of them.
Not sure where to start? Let’s check your paperwork together and make sure your legacy lands where it should.
📞 Call 020 8366 4400
📧 Or email enquiries@cedarhfs.co.uk to get it sorted.