One last act of love from Bank of Mum and Dad

spouse or dependent relative. Now it can be a friend, grandchild, sibling or even a charity. So, far greater flexibility. All final decisions on who should benefit are at the discretion of the scheme trustees, but a nomination form should give clear instructions of intention and will very rarely be changed.

It is possible for trustees to alter the percentage allocated to beneficiaries included on a nomination form, but they cannot add names to it – unless all beneficiaries and executors of the will agree.

Hence all possible intended beneficiaries should be included. For example, someone with a family of three may consider including the spouse with a 97 per cent share and the children one per cent each.

Further, benefits can be paid out either as a lump sum or income, but the income option is only available if the beneficiary has been named on the form (not added in) and the income option selected.

It should be remembered that benefits payable on death before age 75 should be entirely tax free whereas after 75 they are taxable at the recipient beneficiary’s personal rate of income tax.

In the latter case it could therefore make sense to add non-tax paying beneficiaries, such as young grandchildren, who could then receive benefits tax free against their personal tax allowances and perhaps use the income to pay their own school fees.

This area clearly needs careful planning and advice. It could save a significant amount of tax which might otherwise be paid quite unnecessarily.

The new rules are far more generous than many thought would be the case and offer some favourable planning opportunities.

This gives the potential to pass pension funds down through the generations without ever falling into anyone’s estate for inheritance tax (IHT) purposes. But you need to be on the ball. If there are no instructions in place, you are relying on the pension scheme trustees to second guess your intentions. Never a good idea. And with such wholesale changes to the death benefit it is essential to review existing nominations.

You can now build up a pension fund in the knowledge that you can pass on money to family without the previous punitive 55 per cent tax charge.

It is a hugely significant change and has been widely welcomed.

But don’t mess up by falling foul of the red tape.

It is vital that you review that nomination form highlighting who you would like to receive your death benefits and make sure it is kept up-to-date.

If this all sounds a bit complicated, then contact your financial adviser. They can provide vital help and guidance.

OK, nobody likes to contemplate their own death, and that is understandable. So many people let it drift. For goodness sake, don’t fall into that trap.

Think of it in a very different and loving way: the Bank of Mum and Dad’s final act of devotion. Trevor Law is managing director of Merito Financial Services, chartered financial planners, based in Solihull. Email: tilaw@meritofs.com