The run up to the end of the tax year can be a very busy time for advisers and is an ideal time to ensure that clients review their expression of wishes form. Trustees do have the discretion to select who will receive benefits, but will of course take account of any in an expression of wish form.

Many clients complete them once and forget about them, but it is vital that they are reviewed at least once a year and when there is a life event.

The tax charge on death benefits changes depending on how old the client is. Under the age of 75, the lump sum death benefit will be tax free, whether paid out as lump sum or as ‘income’ and also providing it nominated within 2 years of death. If they are over 75, then the lump sum is taxable at the beneficiary’s marginal rate of income tax.

There is also an interesting tax treatment if the money is being left to a charity, as charity payments are tax free regardless of age but can only be made if there are no dependents.

We came across a sad case recently where the husband had died; he had an expression of wishes form which he had kept up to date. He left the majority of the pension fund to his wife Sarah, and some to a number of charities.

His wife decided she would leave the pension money invested, as she did not need any additional income at the moment.

Sadly, she passed away just six months later, but she had no expression of wishes in place. Due to the circumstances, the next step was to review her will to understand how she had wanted her assets to be distributed. The couple had only been married for 5 years and unfortunately her will was out of date as it had been written before her marriage, making it invalid.

HMRC’s pension tax manual is clear on death benefits where a beneficiary has received pension funds and there had been no expression of wish, the administrator has to revert to the original member’s expression of wish states, which left money to charities not listed in the wife’s will.

In this day and age big life events can happen at any time and when dealing with a tragedy updating an expression of wishes form is not often a priority, but it needs to be. An expression of wish form is the easiest and most flexible way in which to distribute wealth on death and should be a key priority to review at the end of every tax year, as a minimum.

Elaine Turtle, Director, DP Pensions