Case Study: Mortgage advice, exploring alternative options clients may not think of

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Our client was recommended to us by a family member who is also a friend of one of our advisers. She had recently split up from her partner, and as part of this they were selling their property and she was relocating, and asked for our advice on a new mortgage.

During our initial chat we discovered that there was an existing mortgage in place, that was on a fixed rate with penalties for early encashment, that the client and her partner were willing to ‘take on the chin’.

We queried this, and with authority from both were able to port the existing mortgage in just one name, so our client was able to keep the existing fixed rate (which is much lower than current rates), and the sizeable encashment penalty will be avoided. Between them the latter alone will have saved them over £6,000.

This is one benefit of paying for advice, years of experience means we know what to look for, and there may be options you don’t even know are there.

What happens to my pension when I die?

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If you die before you’ve taken everything from your pension pot, its value will normally be paid to your beneficiaries, providing that you have nominated them. This could be your spouse, civil partner or long-term unmarried partner, or it could be to your children or grandchildren for example, or even wider family or friends or charity.

If you die under age 75, any benefits paid to a beneficiary will normally be tax free. The total amount of tax-free death benefits that can be paid from all your pension plans will normally be capped at the Lump Sum and Death Benefit Allowance (LSDBA), currently £1,073,100.

If you’ve previously taken relevant tax-free benefits from your pension plans, these will reduce your available LSDBA. Any benefits in excess of the LSDBA will be taxed.

If you die over age 75 any death benefits paid to your beneficiaries will be subject to tax at their marginal rate of income tax (there are some exceptions such as where funds are paid to trusts).

There will normally be no Inheritance Tax to pay. This looks like to change further to the recent Labour budget, with undrawn pensions being brought into your overall estate from April 2027 for inheritance tax. This is still subject to consultation, but could be the biggest change in pensions for many years, and may lead to plans for pensions being reassessed. This is still subject to consultation, and may very well change, but our view at the time of writing is that it is too soon to make any changes until the details are clearer, but it is certainly something to keep an eye on for now.

Tax treatment depends on individual circumstances and is likely to change over time.

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