Death in Service - how to be sure partner will receive it, rather than company in financial trouble?

mulan173

It maybe a bit of an odd question, but hear me out...

I've worked for my company for 4 years. I have access to a "death in service" scheme at my employer which would pay out 3x gross salary (my salary is approx £29,000 currently) if I die while employed by the company. I was asked to fill in a "expression of wishes" form when I started employment, in which I put 100% of the payment to go to my long-term partner (been together 9 years but we are not married and don't intend to be unless there is any "practical" benefit in doing so).

Lately I've been reviewing all of my finances (including pensions, savings, investments, Bitcoins (!) etc) and I found out that the death in service payment isn't actually guaranteed to be paid out to my partner, but rather would be subject to the decision of the Trustees. I understand that this is due to the wording of "discretionary trust" whereby if it's dictated to be paid to someone directly, there are some tax (?) consequences so this is how it can be paid out outside of inheritance (?) tax.   (I'm a bit uncertain about that part)

Well, the Trustees are people high up in the company. And the company is in a bit of trouble lately (as many companies are, of course), due to the pandemic and so on. And, I think you can see where this is going -- it would be more beneficial for the death in service payment to be directed back into the Company as a cash injection, to help save the jobs of other people, rather than to my partner, since they have discretion over it and it's essentially a "life insurance policy" over someone else's life that I haven't had to pay for.

So I want to avoid this possibility if I can, and make sure that the "death in service" payment would go into my estate, and be subject to my will, rather than given to company-employed trustees who have a vested interest in using it for the benefit of keeping the company afloat rather than just paying out to my partner who already has her own job and a house so doesn't rationally need financial assistance...

In some sense it would be justified perhaps in that my partner is also working and financially independent, so wouldn't "need" the death in service payment as such although it would make things easier.

Can I just make out the form to something obviously fictitious like "Mickey Mouse" or such like? Can I cross out the whole form and write "Pay it into my estate?" Or something else? Is there any way to "cancel" an expression of wish form I submitted before the pandemic, so that it would be treated as being part of my estate?

mulan173

I couldn't find a way to edit the OP so I had to add it as a comment: I'm starting to feel a bit selfish for wanting this, although I know it's best for my own family.

Probably I should trust the 'Trustees' (!) in that if they felt it was better to pay out to my partner then they should but if the money would be better used in keeping people employed at the company then they ought to decide that instead?

Nearlyold

What you fear has never happened and never will. Whatever you write on the expression of wish form is not binding on the Trustees its true, but putting something bizarre will only cause delays and confusion in the event of your demise. Keeping the DIS outside the estate is not just tax efficient but also ensures it can be paid out quickly with no delays for probate etc.

mulan173

Nearlyold said:

What you fear has never happened and never will.

But then what stops Trustees redirecting the death in service money back into the company if they unilaterally deem that that's the best course of action? After all the expression of wish isn't binding, so the trustees have to decide what's best to do with the money. And it may well be better to help secure the employment of other people, rather than pay out to an already financially surviving partner.

Thrugelmir

Pension scheme trustees are bound to act in accordance with the scheme rules and their powers are written into the trust deed. Not a role that's undertaken lightly. 

If the event of an early demise. The trustees will most likely simply require sight of evidence to support your relationship. Joint ownership of house, bank account for example. In order to sanction payment from the insurance company. The insurance company themselves will obviously be checking for fraud themselves. 

Raiding the pension fund for company use died with Robert Maxwell many years ago. The result of his actions was the catalyst for the very different landscape that schemes operate under today. 

Nearlyold

The Company won't be a class of potential beneficiary. 

mulan173

Nearlyold said:

The Company won't be a class of potential beneficiary. 

Not as such I suppose but unmarried partners don't fall into any of the categories of people it could be paid to, so I think maybe at that point the company has as much claim over it as anyone else -- especially if they need to pay their own vulnerable people and can't due to financial problems.

mulan173

Btw we don't have a joint bank account or joint ownership of property or things like that,  It would be easy for trustees to say there is no real evidence of a relationship.

xylophone

The assets of the pension scheme are entirely separate from those of the company.

The Trustees cannot simply choose to direct the pension wherever they please - they are bound by the rules of the scheme.

If this were not the case, what would there be to prevent Trustees from simply deciding that they would pay all DIS payments to themselves or their favourite great aunts?

Old_Lifer

The  company cannot use money in the pension scheme  to bolster it's own finances.   It is not a piggy-bank that they can dip into whenever the need arises.   The pension scheme is not the company.  You are confusing the two.   

Setting-up a pension scheme is a lengthy process and  the whole thing has to be approved by that part of the  Inland Revenue  (or should I say  HMRC)  which deals exclusively with pension schemes.   The Scheme must be run by the Trustees for the benefit of the members  as laid-down in the Rules  contained  in the  Definitive Trust Deed  (an Interim Trust Deed is first set-up to establish  the Scheme).    The Rules will list the categories of persons eligible  to receive a payment under the Scheme.   During my service, the  standard final category in our schemes was   ' any other person who in the opinion of the Trustees.......etc. '     Since the Trustees have a wide  discretion under the Rules and your expression of wishes form is only a request ,  the  payment  does not form part of your Estate.

You should not try to amend the expression of wishes form, lest it be considered invalid.

Thrugelmir

mulan173 said:

Btw we don't have a joint bank account or joint ownership of property or things like that,  It would be easy for trustees to say there is no real evidence of a relationship.

If your partner is unable to satisfy the Trustees that you were cohabiting for at least 2 years (likewise freely able to enter into a legal relationship) and that you were financially interdependent. Then no monies would be paid out. Onus is entirely on your partner to provide the evidence requested. 

Unless you are willing to be proactive then it will be easy for the Trustees. Only yourselves to blame.