Superannuation Death In Service Benefits

[207700]

I am 55 years old and single and work in the NHS.I have death in service benefits of £180000 which would be paid into my estate on death thus increasing the IHT liability.
My estate is left to my nephews and neices,none of them are yet financially dependent.Is there any way these benfits could be paid to them instead of being paid into the estate on my untimely death?
Many thanks

[Lee Young]

You should request a nomination form from the administrators of the scheme to direct that the payment should not be paid to your estate but should be paid to your nephews and nieces in line with the terms of your Will. Provided it is not payuabel to your estate on your death there will be no IHT liability attached to it.

[maths]

Unless the NHS scheme is unusual any death in service benefit payable is payable normally only at the discretion of the trustees ie it does not automatically fall part of your estate for iht purposes.

As suggested by "Lee" it is usual on joining a pension scheme to automatically be asked to nominte to whom you would like any benefits to go; you may therefore have done this. I suggest you check this and if you haven't then simply nominate your nephews/nieces.

The same procedure needs to adopted should any pension also be payable in the evnt of your death.

One final point. I don't believe that you can dispose of the lump sum under your will (if the pension scheme rules indicate that payments are discretionary) as you are not beneficially entitled to the the monies.

Bottom line: make sure you nominate who you would like to benefit asap.

[bob.fraser@towrylaw.]

There may be a wider problem here.

I am aware of a past difficulty with the NHS death benefits nomination procedure which has adverse implications for IHT. (This may have been resolved, although I am not aware of this).

The problem was that the NHS nomination forms binds the NHS to act as directed. The trustees have no discretion.

IF this is still the case then the point made in the Inland Revenue Manual (IHTM17083) is relevant. It states "Where the deceased had an unfettered power to sign a nomination (either for the first time or having revoked an existing nomination) which bound the trustees of the pension scheme to make the payment of the death benefits (IHTM17030) to the person named by the deceased then a claim to Inheritance Tax arises on the death benefits as an asset of the deceasedÂ’s estate (IHTM04029) under IHTA84/S5 (2)."
It does say that if the power is exercised irrevocably more than 2 years before the deceasedÂ’s death (assuming the deceased to have been in good health at the time) then no Inheritance Tax claim normally arises.
However, if you have the right to change your nomination at any time, then I doubt if your nomination is irrevocable.

I shall try to find out the current situation, but I suggest that you speak with your pension trustees promptly.

If anyone can update my understanding, I would be grateful.

[bob.fraser@towrylaw.]

I said that I would obtain clarification, and so I wrote to the Department of Health, Social Services and Public Safety (which is the NHS equivalent in Northern Ireland)(where I work)
The answer is received is:
"The Regulations governing the HPSS Superannuation Scheme provide a member in superannuable employment may give notice in writing to the Department that the lump sum death benefits are to be paid to a person named in the notice. The Department will pay the benefits to the nominated person unless that person has died before a payment can be made or, in the opinion of the Department, payment is not reasonable practicable. There are no other grounds for discretion"

This being the case, then I do believe that the payment will fall foul of the point I have made above. You will need to check that the NHS scheme has not been changed, but I would expect the local superannuation scheme to have followed suit.

If any lawyer knows of a way round this (other than paying to a spouse), I would be grateful to know.