I am in the fortunate position of having more pension than I’m going to need when I retire next year.  I have worked for the Local Authority for over thirty years at quite a high level so my pension from that is going to more than meet my income needs.  I also have a private pension that I’ve been paying into for several years that is now worth about £280,000, which I can’t see that I will need to touch.  Should I take it all out when I retire and invest it so that I can leave it to my children?

Carl Lamb responds

Your private pension is an investment just like any other, so there may be no immediate need to move it provided you are reviewing it on a regular basis to ensure it is performing to your expectations.

Unused pension savings from what we call a defined contribution scheme – one that has been built up through contributions and any investment growth – can be left to your heirs either as a lump sum or as pension income, so wanting to pass it on after your death isn’t a reason to move it.  You should ensure that you have nominated who you want to benefit from any pension death benefits using an Expression of Wishes form from your pension provider.  Death benefits are paid at the discretion of the pension scheme administrators, usually according to your wishes.  Importantly, the discretionary nature of the payment means that your pension savings will not normally count as part of your estate for Inheritance Tax purposes.

There may be occasions during your retirement when you might like to access some of the private pension and you can do this as and when needed, either direct from the funds or using a flexible withdrawal contract known as flexi-access drawdown.  This would enable you, for example, to potentially help your children when they are buying a new house or putting their children through university.  However, you should bear in mind that some or all of these withdrawals may be taxed as income.

I suggest you meet with a Chartered Financial Planner to get independent advice about managing the investment of your pension savings to ensure that you and your children can get maximum benefit from them both in your lifetime and after your death.   Putting together a financial plan now will give you the opportunity, for example, to explore lifetime giving using pension withdrawals at different stages in the future.

Any opinions expressed in this article do not constitute advice.  The value of an investment and the income from it could go down as well as up.  The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.