Angela South, managing director of Magna Wealth Management Ltd, said that those with private pensions should make sure they keep their paperwork up to date to avoid confusion over who should benefit when they die.
“Many people think if they have made a Will and kept it up to date, then this is sufficient, but it is equally important to make it clear who should benefit from their pension funds when they die.”
Her remarks follow a report from the Association of Member Nominated Trustees (AMNT) which said there had been a recent rise in disputes over payments.
“The problem usually occurs where someone has belonged to a company where benefits are linked to their salaries.” she said.
In this instance, the individual paying in should be asked to fill in an “expression of wish” form. This indicates who should receive the pension benefits if they were to die.
Ms South said:
“Of course, many people fill in the ‘expression of wish’ form when they join a scheme, and it never occurs to them to update it in later years. As we all know, family circumstances may change over years. It is important that you keep your ‘expression of wish’ form updated and also have a current Will to reduce the likelihood that decisions will be challenged.”
It is the pension scheme trustees who decide who should receive the benefits, but where the saver’s intentions were not clear, disputes can arise over who should be recognised as the beneficiaries.
A pension member had signed the form in January 2000 stating he wanted death benefits paid to his two adult daughters. However, in May 2001 he married his second wife.
“He died in April 2006 and had neither updated his preferences nor left a Will. The trustees followed the paperwork that existed and decided to pay the death benefit to his daughters, in accordance with the last and only existing ‘expression of wish’ form available to them.” said Ms South.
His second wife challenged the decision and took her case to the Pensions Ombudsman which agreed with her. It found that the trustees did not do enough to find out how financially dependent the second wife was on her husband’s pension, nor whether his daughters were financially dependent on him.
Ms South said:
“In this instance, the Pension Ombudsman ordered the pension scheme trustees to review their decision.”
Barry Parr, co-chairman of the AMNT, said complex family arrangements made it increasingly difficult for trustees to make decisions, for example where pension savers remarry and fail to update their wishes – and there are children involved in one or both of their relationships.
Trustees must take members’ wishes into account, but they do not have to follow them if they decide another solution is more appropriate, or in cases where the scheme rules do not permit those wishes to be carried out.
Ms South warned:
“If your situation is not straightforward, and you want to exclude someone from receiving death benefits, you should give very explicit reasons why you wish to do so. This should be backed up by your Will and you should take appropriate legal advice to ensure that your wishes are ultimately carried out as you intended.”