Your retirement pot could go to the wrong person
Martin Lewis has issued a reminder about a pensions rule that people often forget. You may want to check over your records as it’s important to have your details up to date.
A question came into his BBC podcast from a couple who had just got married. They wanted to know what financial details they should have up to date. In response, the consumer advocate said there is one aspect of your pension arrangements that you definitely want to have all present and correct. He said: “You will probably have workplace pension schemes. It’s important to understand when you sign up to a pension, you fill out an expression of wishes.”
He explained the importance of the key document – and why it can be easy to overlook. Mr Lewis said: “It can also be called a nomination form. Many people forget that they’ve done this. And that’s because your pension is not included in your will.
“The expression of wishes tells the trustees of the pension or the pension firm who you would like your pension to go to in the event that you die.” If you’ve just tied the knot and had a previous partner, you may want to check who you have down on this form.
‘Really important’
If it’s your ex-partner, your pension pot will go to them when you die even though you are no longer together. Mr Lewis said getting a will done is also “really important”.
When you get married or enter a civil partnership in England, Wales or Northern Ireland, any previous will you had will likely be invalidated as a result. Some other financial rules for newlyweds to consider include the inheritance tax benefits of being hitched.
Each individual gets a standard allowance so they can pass on up to £325,000 in total assets when they die, plus another £175,000 when passing on their main residence to a direct descendant. However, if you are married or in a civil partnership, when you die you can pass on any unused allowances to your partner, potentially doubling their standard allowance to £650,000, and the main residence allowance to £350,000.
Another potential perk for couples who have tied the knot is the marriage allowance. This is where should one of you be a non-taxpayer, they can pass on 10 per cent of their personal allowance, or £1,260, over to their partner.
You may think that as you are a couple in the eyes of the law, you can take on you partner’s financial affairs should they be unable to manage them. But you will actually need to get a lasting power of attorney in place to do this, as with any other person.
Mr Lewis takes the position that this document is “more important than a will”. He warned: “Because once you’re dead, you’re dead, and there are intestacy laws and it won’t mean your money goes to the right place, but it’ll mean it’ll go somewhere. But if you’re incapacitated and you can’t make decisions for yourself, then the finances can be locked away.”
