British expats are urged to check their wills and financial paperwork are up-to-date to make sure their retirement savings go to the right person.
Most pension schemes ask a pension saver who should have their money if they should die – but many savers forget to pass on the details or to change them should the named beneficiary die or their relationship breaks down.
The information is on an ‘expression of wish’ form filled in at some stage by the pension saver.
If no one is nominated, the pension trustees make a decision on who they consider should have the money if the instructions left by the retirement saver are unclear.
However, this is leading to an increase in legal challenges to the decisions that drain the pension fund of cash.
The issue affects all pensions – including Qualifying Recognised Overseas Pension Schemes (QROPS) belonging to British expats.
Families facing the most problems are those where the saver had a final salary pension, as they generally have greater death benefits attached than a QROPS or other pensions.
Barry Parr, of the Association of Member Nominated Trustees, said: “Pension trustees consider the member’s wishes, but if the expression of wish form seems outdated, they must think about whether other unnamed beneficiaries should have a share of the fund as well.
“Complications generally arise when pension savers do not update their paperwork when they remarry.
“This can cause a real problem for the trustees if the pension saver has children by both marriages.
“Reviewing the paperwork every now and then to make sure the wishes are current can solve a lot of expensive and distressing problems for others further down the line.”
Expat wills and IHT
Expats should make sure they have wills in each country where they have assets to make sure they are appropriately dealt with by the authorities.
A British expat with property in the UK and, say Spain, should have a will in each country to avoid confusion over wishes and different legal treatments of their estates.
Inheritance tax is another issue. Family and loved ones of British expats who have transferred their UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS) will find any unused funds are exempt from inheritance tax in the UK, providing they live overseas.
In the UK, many retirement savers will have bought an annuity paying a regular income with their pension funds. Unless the annuities are set up to survive them, these funds die with the retirement saver.