Can all their money really be gone?

JoBlue

Hi all, I have sadly lost both my parents in the past 4 years in separate accidents. My father had a pension through Tower Watson which he set up through his work about 30 years ago. He paid into this regularly. After his death at the age of 62 his pension passed to my mother, this became her only income, along with her state pension. Sadly in January my mother also died as the result of a road traffic accident. I am now being told by Tower Watson that my sister and I have no claim to any of my father's long saved pension (which would be several thousand pounds if not more) and also that we must pay them the 3 months over payment, as we only recently told them of her passing. Does anyone have and advise? My sister and I just feel that my father paid for so long to give him and our mother a long and comfortable retirement, it seems awful that it all just disappears. Do we have a leg to stand on or is there any paperwork we can ask the pension company for to help put our minds at rest?
Thanks

PeacefulWaters

I doubt there will be any pensions that continue to pay benefits to adult children.

Sorry.

dunroving

JoBlue wrote: »

Hi all, I have sadly lost both my parents in the past 4 years in separate accidents. My father had a pension through Tower Watson which he set up through his work about 30 years ago. He paid into this regularly. After his death at the age of 62 his pension passed to my mother, this became her only income, along with her state pension. Sadly in January my mother also died as the result of a road traffic accident. I am now being told by Tower Watson that my sister and I have no claim to any of my father's long saved pension (which would be several thousand pounds if not more) and also that we must pay them the 3 months over payment, as we only recently told them of her passing. Does anyone have and advise? My sister and I just feel that my father paid for so long to give him and our mother a long and comfortable retirement, it seems awful that it all just disappears. Do we have a leg to stand on or is there any paperwork we can ask the pension company for to help put our minds at rest?
Thanks

First of all, I am sorry about the situation you are in. It's hard enough to deal with losing your parents without the stress of dealing with the financial fall-out.

Without further details it is hard to tell you the right answer. However, it is entirely possible that the pension cannot be passed on. If they purchased an annuity to provide retirement income, the trade-off of the benefit (guaranteed income for life) is that if you die early, the money is gone. It's a bit like state pension - when someone dies, the government doesn't keep paying it to their descendants no matter how long they paid in.

I have recently been trying to help a friend to think through her retirement arrangements. She has a fair sum in a pension and a bond. She needs income in retirement and also wants to preserve the capital to pass on to relatives if she dies. She asked me about annuities and she liked the idea that she'd get income until she died, whether that was at 65 or at 105. But when I told her it disappears in a puff of smoke when she dies, she was horrified.

She will likely fund her retirement via several means but will mainly draw down her pension fund. I have explained t her the trade-off with that. If she dies early, there will be some left for relatives. If she lives until she is 105, the money may run out so she'd have no further income, and there'd be nothing left for relatives.

dunstonh

I am now being told by Tower Watson that my sister and I have no claim to any of my father's long saved pension (which would be several thousand pounds if not more) and also that we must pay them the 3 months over payment, as we only recently told them of her passing. Does anyone have and advise?

Sorry for your loss.

The fact it is Towers Watson would indicate it is either a final salary scheme or a scheme pension. When these are in payment, there is usually a spouse pension and a dependants pension for children under 23. However, when the spouse dies and there are no children under 23, the pension will cease.

My sister and I just feel that my father paid for so long to give him and our mother a long and comfortable retirement, it seems awful that it all just disappears.

He may not have paid anything. It may have been non-contributory. However, if he did pay, it would have been a very small amount relative the benefits it paid out in retirement. It also achieved its goal. i.e. pay an income (and lump sum on retirement) for him and his spouse.

Do we have a leg to stand on or is there any paperwork we can ask the pension company for to help put our minds at rest?

The scheme rules are defined. There ceased to be a pot of money available the minute the pension income was commenced. You can ask them for a copy of the scheme booklet but what you describe sounds very typical of an occupational pension.

jamesd

JoBlue wrote: »

we must pay them the 3 months over payment, as we only recently told them of her passing

You and your sister do not have personal liability for this. Rather, the liability rests with her estate, which must refund the money before passing it on to the beneficiaries of the estate. If the assets of her estate have been distributed then yes, you should return it.

JoBlue wrote: »

Does anyone have and advise?

Pay the money and ask for more information about the nature of the pension so that we can confirm that what has happened is normal and expected for the type of pension that it was.

If it had been a more modern defined contribution pension and if it had not been used to buy an annuity or defer the state pension to produce guaranteed income there would have been a substantial pension pot to inherit - 100% of the current pot value, often tax free. But this does not apply to the final or average salary schemes that used to be very popular in the private sector and remain so in the public sector.

While it doesn't help you except in understanding, the defined benefit and annuity systems are set up so that those who die early subsidise the larger pensions of those who die later, increasing the average pension income value. The defined contribution systems do not have this cross-subsidy.

xylophone

My sister and I just feel that my father paid for so long to give him and our mother a long and comfortable retirement,

But not to support independent adult children........

It may be that your parents saved/invested pension income with a view to benefiting their children after their passing?

And a pension overpayment, whether from a private or state pension, usually needs to be repaid from the estate of the deceased.

agarnett

jamesd wrote: »

While it doesn't help you except in understanding, the defined benefit and annuity systems are set up so that those who die early subsidise the larger pensions of those who die later, increasing the average pension income value. The defined contribution systems do not have this cross-subsidy.

Yes I agree that this is where we are at, and with hindsight, such systems should have been compulsorily dismantled a long time ago because instead of benefiting other members of the same society, the systems in the private sector at least have become notoriously rigged (just as badly as Endowments, PPI, LIBOR, FOREX, WIth-Profits funds, and heaps more ...) to benefit corporates involved, be they banks, insurance companies or pension scheme sponsoring employers.

What is worse, is that communication of how DB schemes actually work has been deliberately scaled back over the past decade, playing upon the blind faith or apathy of members that someone is looking after their interests. In particular, what happens upon death of a member and spouse (generally that's the end of the line) is woefully poorly communicated. Death in Service benefits for active members have generally been very adequate, but upon ceasing to be an active member of a DB scheme, insufficient communication occurs and generally deferred members and retirees have been lulled into a false sense of family security - their kids may be grown - why do they need death benefits anymore ? That was then. This is now. It is quite common for bank of granddad and grandma to be an important crutch for family networks. The recent phenomenon or claimed trend of over 55 "SKI-ers" (Spending the Kids Inheritance) is a distraction from the reality that the average age of a first time buyer is now late 30s I think?

We can't go on propounding that the old ways are best when it suits us when we can see growing gaps of injustice opening up. Trustees simply must not be trusted, not because they are out and out crooks, but because without much greater trade union support than is generally in train in the UK, Trustees have very little power or motivation to do anything other than the scheme's employer sponsor's bidding.

I conclude that therefore all pensions should either be

• effectively nationalised (can you imagine the mess a government would make of it though!) which would effectively mean all surpluses upon death are reinvested for the benefit of scheme survivors as a whole, so they are not seen as part of any inheritance prospect, or
• they should all without further ado be converted into DC-like personal pots (my preferred option although it would probably instantly bankrupt the country to give those to public sector workers so I am not sure how I would start to disappoint/disinherit some of those!).

kidmugsy

If your father had lived past 85 would you have said that his pension should have been stopped because he'd had more than his fair share out of the scheme?