Pension - death in service benefits - salary challenge

en0u1209

Hi,

I'm looking for some advice in relation to my Late Father's pension. He passed away in September, suddenly and unexpectedly. He had been ill, but expected to make a full recovery. At the time of his death he was on a phased return to work. He was on 50% salary and expected to increase back to 100% as he got better.


The pension provider provides a death benefit lump sum of x3 the deceased member's salary. When providing his salary to the pension provider, his employer confirmed the 50% amount was temporary and he was expected to return to full salary. The pension provider has said that the salary used for the death benefit has to be what is being paid on the date of death. I have been told it has no discretion and cant use his contracted salary.


I was just wondering if anyone has experience of challenging death benefit decisions. Have I got a leg to stand on? Or, are they correct in their decision?


TIA

blue.peter

Firstly, I'm very sorry for your loss.

I assume from what you say that this is an occupational pension scheme set up under trust. Even if it's structured differently, the principles that I'll set out will still apply.

The definition of "salary" to be used in calculating the death benefit will be covered by the scheme rules providing the benefit. It's worth your while checking them. The scheme administrator will give your father's executor/the administrator of his estate (you?) a copy of the rules on request (or a relevant extract from them - believe me, you won't want to read the whole document!). My recollection is that they have a statutory obligation to do this under the disclosure regulations. That's certainly the case when a member is dealing with their own pension, but I don't recall the detailed rules when the member has died.

It's certainly likely that neither the scheme administrator nor the trustees will have any discretion over the amount of benefit payable. Once you've established what the rules say, that's likely to be all there is to it. I'm sorry to say that my guess is that the reduced salary is likely to be the correct one to use in this situation.

The scheme should have an Internal Dispute Resolution Procedure, and will give you details of this if you do find that you need to make a complaint. If that doesn't resolve the problem, you can take it to the Pensions Ombudsman. (A Google search on that term will soon show you how to contact the Ombudsman.)

en0u1209

Thank you for your quick response.

Yes it is an occupational pension scheme and I am the administrator of my Father's Estate.

The scheme rules state "3 times the annual rate of salary of the member at the date of death". Would that be the reduced salary? Seems so very unfair when he worked on his full salary for so many years and was due to go back to it.

If the scheme rules are that strict, would there any point going through the internal dispute resolution procedure?

blue.peter

en0u1209 wrote: »

The scheme rules state "3 times the annual rate of salary of the member at the date of death". Would that be the reduced salary? Seems so very unfair when he worked on his full salary for so many years and was due to go back to it.

I agree that it seems unfair. It's certainly very unfortunate. But the annual rate of salary would be 12 x the monthly payment when he died, not what he hypothetically would have received if he'd been able to revert to full-time working. I've a suspicion that this particular situation was simply not envisaged when the scheme was set up. Or, if it was, it was thought too unlikely to be worth considering. Whatever the case, I'm afraid there's nothing that can be done now.

en0u1209 wrote: »

If the scheme rules are that strict, would there any point going through the internal dispute resolution procedure?

Probably not. If you do, it's likely to be a bit of a hassle and to take a while, and I can't see much likelihood of success. On the other hand, you've nothing to lose by it.

en0u1209

Seems like a lost cause then. It’s quite upsetting really as his work wasn’t very good with him while he was ill. Now it feels like they have done him over again. He never would have agreed to the extended phased return if he knew this would be a consequence. Feels like it devalues all his years work.

Thank you for your help.

Marcon

en0u1209 wrote: »

He never would have agreed to the extended phased return if he knew this would be a consequence. Feels like it devalues all his years work.

I can understand exactly why you feel as you do, but if your father wasn't well enough to return to work full time, but was expected to make a full recovery/return to full time work in due course, I don't think there would have been much choice in the matter if he wanted to keep his job. If he was expected to recover, then the death in service lump sum probably wouldn't have featured in his thinking - and I suspect it almost certainly didn't cross the employer's mind, either. Presumably there is nothing in writing from HR about the matter? If so, this could take precedence over rules of the pension scheme on the basis the DIS payment would be contractual.

I'm not sure if the sentence you have quoted above is actually taken from the Trust Deed & Rules, or simply from the member handbook or similar. Normally there would be at least one further definition involved: 'Salary' (with a capital S to show it is defined in the Scheme's rules) or 'Pensionable Salary' (again, the capitals indicate it is defined in the rules).

Before throwing in the towel, I'd get some free, impartial and expert help from TPAS: https://www.pensionsadvisoryservice.org.uk. Ask the trustees of the scheme (or the third party administrators who administer the scheme on their behalf - any scheme paperwork should have contact details) for a soft copy of the Definitive Trust Deed & Rules. You are entitled to this, and although they can charge 'a reasonable amount', it would be unusual to charge anything for simply sending you an e-mail with the Deed attached.

I would then ask TPAS to check two things: whether the rules have been interpreted correctly; and whether they are aware of any Pensions Ombudsman rulings in this area which might be helpful.

Please don't get your hopes up too much, but at least by following this course of action you can be sure you have checked fully and that the correct amount will be paid out, both in terms of any lump sum payable and also any survivor's pension (?is there a widow/partner who might qualify).

en0u1209

Marcon wrote: »

I can understand exactly why you feel as you do, but if your father wasn't well enough to return to work full time, but was expected to make a full recovery/return to full time work in due course, I don't think there would have been much choice in the matter if he wanted to keep his job. If he was expected to recover, then the death in service lump sum probably wouldn't have featured in his thinking - and I suspect it almost certainly didn't cross the employer's mind, either. Presumably there is nothing in writing from HR about the matter? If so, this could take precedence over rules of the pension scheme on the basis the DIS payment would be contractual.

I'm not sure if the sentence you have quoted above is actually taken from the Trust Deed & Rules, or simply from the member handbook or similar. Normally there would be at least one further definition involved: 'Salary' (with a capital S to show it is defined in the Scheme's rules) or 'Pensionable Salary' (again, the capitals indicate it is defined in the rules).

Before throwing in the towel, I'd get some free, impartial and expert help from TPAS: https://www.pensionsadvisoryservice.org.uk. Ask the trustees of the scheme (or the third party administrators who administer the scheme on their behalf - any scheme paperwork should have contact details) for a soft copy of the Definitive Trust Deed & Rules. You are entitled to this, and although they can charge 'a reasonable amount', it would be unusual to charge anything for simply sending you an e-mail with the Deed attached.

I would then ask TPAS to check two things: whether the rules have been interpreted correctly; and whether they are aware of any Pensions Ombudsman rulings in this area which might be helpful.

Please don't get your hopes up too much, but at least by following this course of action you can be sure you have checked fully and that the correct amount will be paid out, both in terms of any lump sum payable and also any survivor's pension (?is there a widow/partner who might qualify).

Thank you for your response.

Do you mean something in writing from HR confirming he would still get full benefits? As far as I am aware there isn't. HR have confirmed in writing to the pension provider that his reduced salary was temporary.


The scheme rules define the term salary as:

"Salary" means, in respect of eligible employments of a member, the aggregate of:
(a) the gross fixed salary or salaries and fixed cash allowances (excluding those under (b)(i) below); and
(b) where the employer with the consent of the trustee company (such consent to be given on an individual or a class basis and subject to such terms and conditions as the trustee company may think fit) so determines:
(i) any fixed cash allowances agreed between the member and the employer and taken in place of benefits in kind and all or any part of a member's benefits taken in kind which are, by agreement between the member and the employer, treated for the purposes of the scheme as being a notional fixed cash allowance; and
(ii) any fluctuating remuneration averaged over the preceding 12 months or over the whole period, if shorter."


He didn't have a partner or widow. The beneficiaries are me and my sister. As I understand it there is no pension payable. He also is not entitled to an uplift on the lump sum. because he was over 65.

I will make enquiries with TPAS. That is very helpful. Thank you.

AlanP_2

I wouldnt get your hopes up but to my mind it comes down to the definition of "gross fixed salary" as in Point (a) above.

If the salary for the job was, say, £30k and your father was working 50% of the time for 50% of the "gross fixed salary" as he went through his phased return then it seems to me that the £30k figure should be used.

What had he had in writing from the company as regards the phased return / salary / hours etc?

Thrugelmir

en0u1209 wrote: »

Seems like a lost cause then. It’s quite upsetting really as his work wasn’t very good with him while he was ill. Now it feels like they have done him over again. He never would have agreed to the extended phased return if he knew this would be a consequence. Feels like it devalues all his years work.

Appreciate that this is a difficult time for you. Your father was fortunate to be working for an employer that offered 50% of salary while on sick leave. Many employers offer little more than statutory sick pay after an initital period. Likewise I suspect for an extended period he also benefited from a 100% of pay while being on sick leave initially. This needs to factored in when considering what the employer has provided financially. If he had of left employment entirely then no death in benefit or sick pay would have been received at all.

en0u1209

Thrugelmir wrote: »

Appreciate that this is a difficult time for you. Your father was fortunate to be working for an employer that offered 50% of salary while on sick leave. Many employers offer little more than statutory sick pay after an initital period. Likewise I suspect for an extended period he also benefited from a 100% of pay while being on sick leave initially. This needs to factored in when considering what the employer has provided financially. If he had of left employment entirely then no death in benefit or sick pay would have been received at all.

He wasn’t on sick leave

en0u1209

AlanP wrote: »

I wouldnt get your hopes up but to my mind it comes down to the definition of "gross fixed salary" as in Point (a) above.

If the salary for the job was, say, £30k and your father was working 50% of the time for 50% of the "gross fixed salary" as he went through his phased return then it seems to me that the £30k figure should be used.

What had he had in writing from the company as regards the phased return / salary / hours etc?

Thank you. I will have a look at the documents we have.