It’s easy to forget to tell your pension provider that you have divorced, separated or moved home.
But when that leads to the wrong person being given the remainder of your pension when you die, things get serious.
That could be the case for more than 750,000 people, according to research by Royal London.
How are you affected?
When you began investing in a pension, either workplace or personal, you will have been asked who you would like to receive the value when you die.
At the time, you may have nominated your spouse, children or someone else entirely.
Think about who you nominated. Do you still feel the same?
Who gets your pension when you die?
According to the study, which draws on data from the Office of National Statistics (ONS), there are roughly 773,000 people in the 55-64-year-old bracket who have been married and are now in new relationships after divorcing.
If they haven’t updated their expression of wish form, their pension benefits will be destined for the pocket of their ex, rather than their new partner, when they die.
Why it matters
The number of new couples getting married fell to a low of 254,669 in 2015 and the rate at which couples got divorced increased by 5.8% in 2016 (Source: ONS). This means that the ratio of divorces to marriages is closing and that divorce is becoming more and more commonplace in modern society.
Therefore, the number of people who need to update their expression of wish forms is increasing, as are the opportunities to forget to do so.
It’s not just divorce
Life doesn’t always follow a set path, and you may find your circumstances changing dramatically in a short amount of time. There are a range of reasons which may make updating your expression of wish form necessary, including:
- Divorce
- Separation
- Remarriage
- Death of a beneficiary
- Birth of a new child or grandchild
Changes in your beneficiaries’ circumstances may need to be communicated to your pension provider, too. For example, if they get married and change their name, you will need to update that information on your expression of wish form.
You may also wish to change how much each beneficiary will receive as their circumstances and lifestyle changes.
Updating your expression of wish
If your circumstances have changed, and it is necessary to update your nominated beneficiaries, the next step is to contact your pension provider or workplace HR department.
They will be able to tell you what your current expression of wish says and will help you to make changes as needed. You can access this information as often as necessary and should do so regularly, to make sure that it is up to date.
Next steps
Whilst you are concentrating on what will happen to the assets you leave behind, you should take the opportunity to write or update your will.
If you have got divorced or have remarried recently, the chances are high that your will does not reflect that change. If so, it will either be invalid or give instructions which are not aligned with your current wishes.
According to research from Macmillan Cancer Support:
- 42% of people aged 55 and over do not have a will
- 8% (1.5 million) have got married since updating their will; rendering it invalid
In addition to this, 20% of wills contain mistakes which the writer knows of, such as:
- Leaving assets to their ex
- Failing to update wills to include children and grandchildren
- Failing to add their new partner
- Putting off the removal of unwanted beneficiaries
What happens to your belongings if you don’t leave the right instructions?
If you have not updated your expression of wish forms to remove an unwanted beneficiary, it is likely that they will still receive their share of your pension benefits when you die.
Wills are more complicated. If your will is valid, your assets should be divided according to the wishes you have set out within it, whether they reflect your true feelings or not.
However, if your will has been invalidated, for example, if you have married since writing it, then your estate will be subject to the laws of intestacy.
Intestacy can result in:
- Your money and belongings being divided up in a way you disagree with
- Your family facing a lengthy probate process
- Dependents being placed in the care of people you would not necessarily have chosen
- Your loved ones paying more Inheritance Tax (IHT) than necessary
It is recommended that you review and update your will at least once every five years. In addition, why not give your finances a review and talk to a financial adviser about your next steps?
To get started, please get in touch with us on 01664 77 88 99.
