SIPP: what happens if I die with no dependants?

Please can someone advise me of a good place to read about what happens to my SIPP if I die with no dependants? I expect my SIPP fund to be large enough that income drawdown would be a suitable choice for me, even beyond 75, sothere is likely to be a fund left when I die.

I believe that if I have dependants (a widow for example) then the trustees would pay the fund to then (her) either in the form of an annuity or, after taking 35% tax off, as a cash sum.

What I am more interested in is what happens if I die with no dependants. As I read it, the fund cannot pass to my (non-dependent) children or cousins but must be paid to charity or to other fund members chosen by the trustees. For me this would be a serious drawback.

Are SIPPS treated differently from other pension funds in this respect? Perhaps the question does not arise becuase other pension funds are either 'uncrytalised' or have been used to buy an annuity - there is equavalent to the SIPP drawdown.

Thank you,

Robert

Reply to
Robert
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I can't remember but surely it gets added to the estate ?

See the following post for the correct names and search on the inland revenue site. If the basic helpguides don't help search for the tax inspector manual.

Daytona

Reply to
Daytona

Reply to
Daytona

Post 75, Income drawdown (ASP) residue funds can be passed to your children (or anyone else you're fond of?) in the form of a pension fund in their name. However, you need to set up a fund in their name inside your own scheme. A minimal amount will do to establish their funds. Not sure why it has to be this way, (ask Gordon) but it does. There's no reason why your fund should pass into oblivion - talk to your SIPP provider or trustees.

-Neil F.

Reply to
neil f

Thank you Neil, this is very helpful.

So this means that once the fund is in drawdown (some income is being paid from it) the value of the remaining fund can be passed to someone else on death by instruction to the trustees. But that someone must be able to have a SIPP. So they must, for example, be a UK resident.

Furthermore, the money will be of no benefit to them until they themselves reach retirement age.

If my widow wants the fund in cash she loses 35% to the taxman which is not very different from the 40% tax saved when putting the money into the SIPP in the first place.

To me these are major disadvantages and the alternative of simply buying shares is better.

Robert

Reply to
Robert

This illustrates the difference between planning for a spouse and planning for kids etc. There's no IHT for a spouse so shares may be best there, although they need careful annual management to minimise long/medium-term CGT liability. But kids will lose 40% to IHT so the drawdown route is a good ringfenced alternative, especially if you think they might blow a standard inheritance before they're wise enough to see the need for long-term planning. Personally I have a bit of both, just in case of future tax regime changes.

-Neil F.

Reply to
neil f

neil f wrote: > > If my widow wants the fund in cash she loses 35% to the taxman which is

The IHT exemption for spouse is important. Also, there is no CGT at death so by not realising the capital gains during one's life (beyond the annual allowances) one can avoid that.

Are you sure that the trustees will be able to pay the SIPP fund into the children's SIPPs? Do you know what happens if the children are not UK residents at the time of your death for example?

Robert

Reply to
Robert

I can't advise on the details. It certainly sounds like you should get some specialist advice if your situation is none-standard but talk to your trustees first. The most important point is to make sure your spouse/kids/whoever have had token pension funds established in the same scheme as yours (before you croak). AIUI funds can't be transferred /outside/ your existing scheme on death.

-Neil.

Reply to
neil f

Yes this certainly does seem to be a shortcoming of such schemes. For me it beats any advantage of the income drawdown feature.

thanks for everyone's comments,

Robert

Reply to
Robert

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