LV= has urged savers to nominate pension beneficiaries as Covid-19 sees increasing pressures on pension schemes and an increasing number of member deaths.

The firm has called on members to make their intentions "as clear as possible", after recording 206 member deaths between 23 March and 15 May 2020, compared to 146 for the same period in 2019.

It stressed that the increase in member deaths had already presented a “major problem” for schemes trustees who have to decide who receives the deceased member’s pension benefits.

In an effort to avoid this problem, the firm has now called on pension scheme members to nominate a “wide range of family members” as beneficiaries of their pension fund.

It stressed the need for members to make their expectations “as clear as possible” in order to avoid disputes, such as by providing a note to the scheme to confirm the members’ intentions should the primary beneficiary refuse or have passed away.

LV= also emphasised the importance of keeping your beneficiaries under review in order to keep up with changing circumstances, such as the birth of children, divorce or remarriage.

The firm highlighted that members who fail to nominate a beneficiary could leave their loved ones facing high tax bills, or forced to take a lump sum when the option of a drawdown or annuity might have been better.

“For example," LV= savings and retirement director, David Stevens, explained, "if a deceased scheme member aged 77 leaves a £300,000 to a child who is a higher-rate taxpayer, they may have to pay over £135,000 in tax if they take the money as a lump sum.

“However, that figure can be greatly reduced if the fund remains in drawdown or is shared among other nominated beneficiaries.”

LV= warned that members could also see their funds distributed to unintended parties, or lead to delays in releasing the funds if additional enquiries are needed to determine an appropriate beneficiary.

Stevens added: “Nominating a beneficiary for your pensions is an important part of financial planning and advisers have an important role in reminding clients how best to do this.

“Pensions can often be worth hundreds of thousands of pounds and nominating beneficiaries can prevent disputes, reduce potentially large tax bills, and ensure the right people benefit
from a scheme member’s pension."

The firm already runs regular adviser workshops on this issue, and includes nomination forms as part of its pension application process.

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