Nest introduces inheritance tax-exempt death benefit option

Nest is introducing a new death benefit option that will allow its members to remove their pension pots from inheritance tax consideration.

Scheme members can now opt in to discretionary decision-making by completing an Expression of Wish form, where they indicate who they would like their pension paid to after their death.

Following their death, Nest will then decide whether or not to pay their pension pot to the beneficiaries listed on their form after taking any changes to the members’ personal circumstances into consideration.

Under this exercise of discretion, a member’s pension pot will not usually be considered part of their estate for inheritance tax purposes.

If Nest decides not to pay to those beneficiaries, the pot will usually be paid to the member’s estate.

Up until now Nest’s eight million-odd members have only been able to nominate a beneficiary.

The pot would is paid to a beneficiary as long as they are alive and traceable at the date of death and is usually be considered to form part of their estate for inheritance tax purposes.

Nest says that the decision to add the new death benefit option has come about due to its changing member demographic and increasing value of their pension pots.

This has led to more members’ pots having an impact on their estate for inheritance tax purposes.

Nest director of customer engagement, Mark Rowlands, said: “We know some of our members are concerned about the impact their pension pot may have on their inheritance tax position. This is why we have introduced this option.

“The priority for other members may be to have certainty over who their pot is paid to. For these members, we have retained the option to nominate a beneficiary.

“This change is the best of both worlds — it gives our members the freedom to consider their circumstances and make the most appropriate choice for them.”

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