Over 60s warned of ‘risky pension oversight’ that can make big inheritance tax difference | Personal Finance | Finance

Thousands of Britons are being urged to nominate who they’d like to inherit their pensions, as nearly half of people aged over 60 admit they haven’t. An expression of wish (EOW) allows people to instruct who they would like to receive their pension when they die, and thousands are yet to complete one.

Experts have warned that it’s a “risky oversight” to ignore, and that it could save families thousands of pounds in inheritance tax (IHT) by sorting it out. Clare Stinton, head of workplace saving analysis at Hargreaves Lansdown, said: “Pensions are currently one of the most tax-friendly ways to pass on wealth, so you’d think most people would be quick to make sure their hard-earned cash ends up in the right hands. Yet 40% of people over 60 haven’t nominated who they want to inherit their pension when they’re gone. It’s a risky oversight for several reasons.”

Firstly, the savings expert explained that not updating your expression of wish form after key life events, such as divorce, may lead to unnecessary delays in loved ones receiving money when you die.

Ms Stinton added: “It could even mean an ex-partner gets the benefit rather than a current one. This can lead to all kinds of financial issues while the situation gets sorted out.”

Another factor is the Government’s decision to make unspent defined contribution pensions subject to inheritance tax from April 2027. Ms Stinton said: “In this case, completing an expression of wish is a small task that could make a big difference – and potentially save your family thousands of pounds.”

Most people nominate their spouse or civil partner as the primary beneficiary, because transfers between spouses are usually exempt from IHT. Under the proposed changes, passing away after 2027 could land younger generations a potentially hefty tax bill if they are named on the EOW.

Conversely, if you’re older, in poor health, and unlikely to live until April 2027, you can take advantage of the current more generous rules and pass money to children or grandchildren tax-efficiently.

However, Ms Stinton said: “This is only an option if your surviving partner has enough to be financially secure without your pension. Should you live beyond the rule change, you can change your instruction – just set up a reminder so this small but mighty task doesn’t slip through the cracks.”

Based on Hargreaves Lansdown’s data, men (40%) are slightly more likely, on average, than women (34%) to have placed an EOW.

Ms Stinton added: “It’s all about making the right choice for your situation – and revisiting it over time. An outdated nomination risks the money ending up in the wrong hands. Marriage, divorce, new loved ones, changes to your health, and new tax rules are all reasons to review your nomination. If unsure about what’s right for you, seek financial advice for peace of mind.

“Your pension could be one of the largest assets you leave behind – don’t leave where it ends up to chance.”

What you need to do

An expression of wish form – sometimes called beneficiary nomination – tells your pension provider who you want to inherit your pot when you die. It’s not legally binding, but it’s the most straightforward way to ensure your wishes are followed.

According to Ms Stinton, it only takes a few minutes to complete and most providers allow you to complete it online.

Ms Stinton said: “If you have multiple pensions across different providers, you’ll need to place your instruction with each one – but again, it’s quick and easy.

“This is more than tick-box life admin. Failing to complete or update your nomination could leave your loved ones facing delays in accessing funds, and with the proposed new rules, possibly also land them with a tax bill that could have been avoided. Whether you’re in great health or facing uncertainty, now is the time to review who you’ve nominated – and why.”