Who would be the recipient of a pension upon death

Natnat91

Hi,

My father has recently found out he is terminally ill. He has two workplace pensions both of which he has not yet taken and he is wondering what would happen to these upon death?

He is currently separated from his spouse. They have been separated for some time now and don't speak; they have not divorced. He also has 3 children from his previous marriage one of which is a minor.

Any advice greatly appreciated

RuthnJasper

Natnat91 wrote: »

Hi,

My father has recently found out he is terminally ill. He has two workplace pensions both of which he has not yet taken and he is wondering what would happen to these upon death?

He is currently separated from his spouse. They have been separated for some time now and don't speak; they have not divorced. He also has 3 children from his previous marriage one of which is a minor.

Any advice greatly appreciated

I'm so sorry to hear about your father; you must be devastated. Can your father remember if he nominated a payee in the event of his death? With the one I had from my old job I had the option to nominate someone on my form; so I named my brother. I'm only in my mid-30s, but it's still worth thinking about as one never knows... Now that my brother is married and has children I have mentioned to him that, should anything happen to me, he is still my named beneficiary but that I would like the money to be used for my little niece and nephew.

If your father (or you, or a representative) contacts the pension providers (does he get an annual statement from the companies?) they ought to be able to confirm if there is a nominated beneficiary or not.

I'm sure you've already thought of this, but has your father named someone as a legal executor of his wishes and estate?

Once again, I am SO sorry for the situation in which you and your family have found yourselves and I hope that the time remaining to your father goes as well as these things reasonably can.

Every good wish. x

redbuzzard

I'm sorry you've had such bad news.

I won't be definitive because it might depend on the trust deed and rules of the schemes in question, as well as the type of pensions, your father's age...

But he should contact the administrator of each scheme and speak to them, and review or complete, if he hasn't done one previously, his expression of wish form.

The scheme(s) may well provide for spouse's and dependants' pensions; and there may be life cover or a contribution refund which would typically go to a spouse.

However - the scheme(s) rules may for example refer to "a spouse who is living with you at the time of your death" or similar wording, so these things don't always follow inevitably and may come down to trustee discretion. Your father will not be able to "will" the benefits as such, for legal reasons the trustee has discretion where the rules don't prescribe, so again the expression of wish is important - the trustee is not bound to follow it but will try consider the member's wishes.

It's also possible, in the circumstances and depending on his age, that he could take the pension - or possibly an ill health pension - with a minimum payment period agreed in view of his health situation. I say possible, because again the scheme rules could bear and trustee discretion be involved.

He should speak to the trustee, either directly or through the companies' pension managers. The sooner he does this the better. They should be able to give some guidance initially about benefits and who is eligible.

I'm not a pensions professional but I have been a trustee. I had one very difficult case where the member died before retirement. He had left an expression of wish in favour of his wife, from whom he had never divorced and they had never made a financial settlement, but they had separated a good 10 years before he died and after he made the expression of wish, which I did not feel necessarily represented his wishes at the time he died. He also had a mother who had to be considered as a possible recipient of death benefits but we were given to understand he was not on good terms with her. The wife was not automatically entitled to any benefit or refund. The trustee had to decide whether and who to pay a substantial sum to. This would have been much more straightforward if the member's wishes had been updated.

Your father may wish to nominate his children in his expression of wish rather than his estranged wife for example.

Sorry this isn't a complete or definitive answer. I would start by (your father) speaking to the scheme managers/trustees.

P.S - Your father should review his will too. The pension trustees won't be bound by it in any way, but they will ask to see it if there is one and will be mindful of its contents when exercising discretion.

A word on the "discretion" dimension which sometimes concerns people. Trustees are bound to act impartially in the interests of members, where discretion is applied, and also to act in accordance with the rules and the deed governing the trust. Trustees take this very seriously, as does the Pensions Regulator.

mark55man

Again sorry to hear your news. The trustees (via the company HR department probably) are the best people to advise.

As RH above says they are required to do the best in sometimes difficult and complicated situations. At least your dad is still able to let you know what he would want to happen - but if it is seen as unreasonable or unusual (sorry but families are difficult) this may make it harder for the trustees to fully comply.

GhIFA

Sorry to hear of your father's situation. Also potentially worth bearing in mind that (and apologies as there is no really easy way to say this), depending on what type of arrangements these are, should his life expectancy be less than 1 year then there may be the option of a Serious Ill Health commutation which would enable him to take a lump sum now whilst still alive, which he can then use/distribute as pleases. (Caveat that by saying it may not be appropriate to his circumstances, but worth bearing in mind).

redbuzzard

GhIFA wrote: »

there may be the option of a Serious Ill Health commutation which would enable him to take a lump sum now whilst still alive, which he can then use/distribute as pleases.

Glad you mentioned that, it was one of the possibilities I was fumbling for - I have seen a case of that too.

Incidentally, since the OP mentions a child who is a minor - if a discretionary payment is made to a minor then it would normally be put into a trust with an independent trustee to administer it, rather than given to the parent or guardian on the child's behalf.

xylophone

In these difficult and sad circumstances, would your father wish to consider a POA in case he becomes unable to manage his affairs in the later stages of his illness? https://www.gov.uk/power-of-attorney/overview

Has he made a will? Even if he has, he might need to review it?

Natnat91

Thank you all so much for your advice, I have passed this on to him and he will be contacting his HR and pension providers ASAP.

jamesd

He'll need legal advice to ensure that his money is distributed as he wants.

For those with a diagnosis of death being likely within a year it's usual to be able to get access to pension pot money. He needs legal advice before he does this because taking the money moves it out of the pension trust and into his eventual estate. that can change who ends up getting the money.

jamesd

RuthnJasper wrote: »

I named my brother. I'm only in my mid-30s, but it's still worth thinking about as one never knows... Now that my brother is married and has children I have mentioned to him that, should anything happen to me, he is still my named beneficiary but that I would like the money to be used for my little niece and nephew.

That's not reliable planning. Consider some failure cases:

1. brother inherits, hits a school bus while driving and leaves a badly injured child or two. All of his assets, including the money from your pension, end up lost to pay compensation.
2. brother divorces, wife gets some.
3. brother develops gambling or drug problem, perhaps after painful illness inadvertently, spends the money.

Safer to modify the expression of wishes to establish a trust for the niece and nephew.

RuthnJasper

jamesd wrote: »

That's not reliable planning. Consider some failure cases:

1. brother inherits, hits a school bus while driving and leaves a badly injured child or two. All of his assets, including the money from your pension, end up lost to pay compensation.
2. brother divorces, wife gets some.
3. brother develops gambling or drug problem, perhaps after painful illness inadvertently, spends the money.

Safer to modify the expression of wishes to establish a trust for the niece and nephew.

I'm really not concerned by these issues, or anything that might happen once I'm gone. If he were to split up with my sister-in-law (highly unlikely) I'd be very happy for her to have some money; she's a fantastic person and a great sister. Plus which, I'd still love my brother whatever happened to him in the future.

Thanks for flagging up the possibilities... but the pension from my policy probably won't amount to very much... might buy the kids a couple of paperclips for their university projects when they grow up though...:)