Winterthur Life have suggested that pension benefits be further simplified when the new Pension Simplification rules come into force in 2006. Under current rules if your pension is being paid and you die your estate receives nothing and the insurance company gets a windfall of the balance of your pension fund that has not been paid out unless you have a spouses pension built in although often at a lower rate of payment and having a spouses benefit means that your starting pension is often lower.
Under the new rules in 2006, if you do not have a spouses pension and there is still a balance of funds on death after age 75 - the balance can be passed within the fund to help others pension scheme members.
Winterthur have suggested that this is a waste and is not helpful to the individual pension member or family. They suggest that on death after age 75 any unpaid balance of a pension fund could be paid to a beneficiaries pension fund.
Our View
This a fair way to move and will mean that money saved by a family member stays in the family. However, it will certainly mean that any windfalls that insurance did make would not be available to cross-subsidise other pension income annuities. This will mean pension annuities becoming more expensive.
More expensive but still the most equitable way to go. The people who have saved (or their beneficiaries) get it back!