03 January 2024 , 10:43
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Brits are being urged to complete a "five-minute" task to ensure their pension pots are protected if they die.
It involves filling out an "expression of wishes form" for your workplace or private pension pot. The form allows you to choose who you want your pension pot to go to if you die before you retire. The document is not a legal document - but instead a formal request and acts as a guide for your pension provider when deciding who will get the pension savings.
If you have not updated your expression of wishes form, it could risk your pension savings being paid to the wrong people, for example, an ex-spouse. This could mean your family would have to contest for your pension. You also risk delays in payments to your loved ones after you die - potentially by months. According to data from Hargreaves Lansdown, 65% of workers over the age of 40 have not got an expression of wishes form in place.
Clare Stinton, head of workplace savings analysis at Hargreaves Lansdown explained that as pensions are "outside of your estate" they are not covered by your will. This means the final decision of where you money goes will rest with your pension provider. You should be aware that as expression of wishes forms are not legal your pension providers are not obliged to follow your preferences, but they do usually take them into account in the majority of cases.
Clare said: "Completing an expression of wish form is a five-minute task you can perform as part of your new year financial refresh that could save your loved ones from months of financial stress when you die. Without this, there are risks of delayed payments and your hard-earned money not being paid to your nearest and dearest.
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"Pensions are typically the largest asset after the home and passing it on could make a real difference to your loved one’s lives. A clear instruction can quicken the administration process and ensure the money reaches your intended beneficiaries as soon as possible so it’s vital you update your expression of wish forms following key life events.
"With divorce rates on the rise, family dynamics are evolving, stepchildren and new partners could be overlooked if no expression of wish is in place. Completing the form enables you to personalise your plan, tailoring the distribution of savings to your unique family and financial circumstances.”
Clare explained how most employers may ask you to complete a "death in service" nomination which should not be confused with your expression of wishes. The death in service nomination is separate and relates to company provided life assurance. You expression of wishes form must be completed directly with your pension provider.
If you have more than one pension, you will need to complete one for each one of your pension pots - you can do this both online and in paper form. When it comes to who can be a "beneficiary" individuals can leave their pension savings to immediate family, friends, charities, or even the person next door provided you know their full name, address and date of birth - you can also split your pot between multiple people.
You should be aware that if you nominate someone under the age of 18, a pension provider will usually only be able to pay out to them if a trust or other suitable arrangement has been set up for them. You should also double check what type of pension scheme you have as certain one will not allow you to nominate everyone.