Last year, Mrs A’s husband sadly passed away. Initially CMS Wealth assisted with notifying providers and gathering the information needed for Probate, but given this major life event it was important that we also worked with her to revisit her financial plan.
Although Mr A hadn’t been in good health for a while, naturally it was still a very upsetting time for Mrs A and she appreciated the compassion and patience her advisor showed whilst listening to her wishes and recommending a course of action which, ultimately, has not only benefitted her but her family too.
Mrs A felt that she had sufficient other assets and wouldn’t need her late husband’s pension pot during her lifetime. Her advisor discussed the possibility of it bypassing her and going straight to her children, which the pension trustees agreed to at their discretion. Thanks to the advisor’s previous suggestion to Mr A to also include his children on his expression of wish form, they each inherited a beneficiary pension which they now have the flexibility to draw from as required. Due to Mr A being over 75 years old when he passed, had his non-dependent children not been listed alongside his wife, their only option would have been a lump sum taxable at their marginal rate of income tax. This would have pushed them into the 45% tax bracket causing nearly half of their father’s hard-earned pension to disappear. In addition, by bypassing Mrs A, this sum avoids being unnecessarily included in her estate for Inheritance Tax purposes when the rules change in April 2027.
The advisor also recommended that Mrs A make an ISA Additional Permitted Subscription (an extra allowance up to the value of the deceased’s ISA that can be inherited by a surviving spouse). Although she didn’t inherit Mr A’s ISA, she was still able to make use of this allowance and move existing savings into her cash ISA. Not only has this prevented tax being paid on the interest going forward – particularly useful given the Chancellor’s recent announcement regarding a two percentage points increase on savings interest from April 2027 – but it has also brought Mrs A back into the basic rate tax band.