Pension pot transferable following death

philiusfogwakey

Hi all, just after some advise as I'm not sure if we've made a mistake or missed something here. 

3.5 years ago my father-in-law suddenly passed away. He had a private pension with a company he'd worked with all his life from the early 1960s to early 2000s when he retired. He split his pension between himself and his ex-wife (my mother-in-law). When he passed we contacted his former employer as he had on file that he wanted to transfer his pension to my M-i-L, and they sent a questionnaire out for my M-i-L to complete, which was an almost financial assessment. Due to health/memory issues my M-i-L wouldn't complete this form and give out 'private' information. We've done nothing since, assuming that the pension was lost. 

My query is, should this pension pot, as his former employer was a private company (international household pharmaceutical company), still be available and transferable to his next of kin (my wife and her brother) even if they won't transfer it directly to their mum? 

A further query, on a very similar vain - my mum passed away last year and she had a small private pension with the GRE - should any remaining monies in this pot have been transferred to my brother's and I?

It just feels odd/wrong that they paid into pensions for years, only for this money to essentially be lost/go to their further employers on their death (what a kick in the teeth that is if it's the case).

Just wondering if anyone can give any advice really, as we don't know where to start. 

Many thanks.

Sarahspangles

Your starting point needs to be to understand if these were Defined Benefit pensions. If so there is no pot of ringfenced money with an individual’s name on it, some of which may remain.

With defined benefit schemes, where someone passes away earlier in retirement the fact they have drawn less is balanced out by someone else passing away later and drawing more.

These types of pensions normally had a feature (or option) of providing a smaller pension and possibly a small lump sum for a surviving spouse or dependent children.

There’s a sudden flurry of queries like this because DC pensions work differently. I can tell you that, as someone who has paid into a DB pension all her working life, people with these plans know that they work this way. If I wanted to guarantee a payment to my adult children once I retired I would take out a life insurance policy. 

Sarahspangles

philiusfogwakey said:

He split his pension between himself and his ex-wife (my mother-in-law). When he passed we contacted his former employer as he had on file that he wanted to transfer his pension to my M-i-L, and they sent a questionnaire out for my M-i-L to complete, which was an almost financial assessment. Due to health/memory issues my M-i-L wouldn't complete this form and give out 'private' information. We've done nothing since, assuming that the pension was lost. 

For this one, you’d need to know what was agreed on divorce.

Marcon

philiusfogwakey said:

Hi all, just after some advise as I'm not sure if we've made a mistake or missed something here. 

3.5 years ago my father-in-law suddenly passed away. He had a private pension with a company he'd worked with all his life from the early 1960s to early 2000s when he retired. He split his pension between himself and his ex-wife (my mother-in-law). When he passed we contacted his former employer as he had on file that he wanted to transfer his pension to my M-i-L, and they sent a questionnaire out for my M-i-L to complete, which was an almost financial assessment. Due to health/memory issues my M-i-L wouldn't complete this form and give out 'private' information. We've done nothing since, assuming that the pension was lost. 

My query is, should this pension pot, as his former employer was a private company (international household pharmaceutical company), still be available and transferable to his next of kin (my wife and her brother) even if they won't transfer it directly to their mum? 

Given the dates of his employment, your FIL would almost certainly have had a defined benefit (aka final salary) pension for much, if not all, of his working life. You say he 'split' his pension, but from the sound of it that was an informal arrangement (ie he gave her cash from the pension income once he'd received it) rather than one sanctioned by a court - had it been the latter, your MIL would have continued to receive pension payments after his death. It sounds as if he simply nominated her as a potential beneficiary, and any pension would be discretionary on the part of the trustees.

If as I suspect it was a defined benefit pension, then the rules will set out who could benefit on the death of the member. If your MIL can fill in the forms now, and prove financial dependency (which is what the scheme was asking, since the rules of the scheme are likely to give the trustees power to award a pension at their discretion to a financial dependent), then that's worth pursuing. If she can't or won't give the information, the trustees' hands are tied.

Unless your wife and her brother depended on their father financially, then no, they wouldn't qualify for a pension - and might not qualify even if they could show some element of dependency. There is no 'pot' to transfer, assuming all benefits were indeed from a defined benefit scheme.

philiusfogwakey said:

A further query, on a very similar vain - my mum passed away last year and she had a small private pension with the GRE - should any remaining monies in this pot have been transferred to my brother's and I?

GRE had a defined benefit pension for many years, so the first thing to find out is what sort of pension your mum had. If (as sounds likely from your post) she was actually in receipt of the pension/annuity, it's unlikely there is a 'pot' to transfer.

philiusfogwakey said:

It just feels odd/wrong that they paid into pensions for years, only for this money to essentially be lost/go to their further employers on their death (what a kick in the teeth that is if it's the case).

Just wondering if anyone can give any advice really, as we don't know where to start. 

Many thanks.

Completely understand why you feel that way, but that's the nature of defined benefit schemes. They promise a guaranteed level of pension payable for the whole of a member's life, with pensions for surviving spouse/partner and (where appropriate) 'eligible' children - usually up to age 23 as a maximum. The money isn't lost; it is used to pay benefits for other members. Those who live way beyond the average age of death do 'better' out of such schemes than those who die much younger. 

Unfortunately much of the media reporting behaves as if everyone has a defined contribution scheme (where you build up a 'pot' of money) and fails to distinguish the crucial differences between DB and DC schemes, raising false hopes far too often. 

Brie

There are some logical assumptions that these are all DB schemes but only by checking with the scheme administrators can you know for sure. 

Even your FiL may have had a DB scheme but with a DC element if he had paid extra into the scheme or if it had changed from DB to DC as many schemes started to do in the late 90s/early 2000s.  The fact that the admins sent a form for your exMiL to fill out shows the possibility that she was entitled to something.  That money wouldn't automatically disappear if she didn't respond.  Lot of schemes have money waiting for someone to claim decades after they were eligible to claim it - mostly due to people forgetting that it's there.  

You don't give any dates for your mom so that's possibly DC, again perhaps only in part.  But some DB schemes also have a guaranteed payout so if mom hadn't been getting it for long there may still be something to pay to whomever she designated as beneficiary.  It may be you and your sibling or it may be someone else.  Ultimately if there is something then the scheme trustees will decide who to pay it to based on who she might have nominated and what might be outlined in any will she may have had.  

Flugelhorn

also need to remember if they had a DC pension but bought an annuity, would be unlikely for there to be anything due to children 

Tommyjw

If a DB Scheme and a spouse's pension automatically payable, the amount that your mother would have been entitled to over the ~2 years payable to her should still be an amount owed to the estate, at least, so as always it just about contacting them and asking.

Albermarle

There is an explanation in this link of the difference between Defined Benefit (DB)schemes and Defined Contribution ( DC)  schemes.
Pension basics | Help with pension basics | MoneyHelper

DB schemes in the private sector were quite common in the past with larger companies, but quite rare nowadays as they are expensive for an employer to fund.
In general they are much better than DC schemes, but there is the drawback that if you die early, you lose some of the benefit, ( although if you live to a ripe old age you gain)
Just the same as with the state pension.

Marcon

Tommyjw said:

If a DB Scheme and a spouse's pension automatically payable, the amount that your mother would have been entitled to over the ~2 years payable to her should still be an amount owed to the estate, at least, so as always it just about contacting them and asking.

Don't there are any actual spouses involved. First part of the post is about FIL and his ex-wife, OP's MIL; and the second part is the death of OP's mother.

p00hsticks

philiusfogwakey said:

It just feels odd/wrong that they paid into pensions for years, only for this money to essentially be lost/go to their further employers on their death (what a kick in the teeth that is if it's the case).

In addition to the comments already made with regard to DB pensions, it's worth pointing out that in many cases the employer contributed far more than the employee to these schemes - some were even non-contributory for the employee.

The value of the schemes as an employment benefit was (and still is) largely not fully appreciated by the employees and it is that and the cost that has resulted in many companies abandoning the schemes in favour of DC pensions.

Aretnap

philiusfogwakey said:

It just feels odd/wrong that they paid into pensions for years, only for this money to essentially be lost/go to their further employers on their death (what a kick in the teeth that is if it's the case).

Assumong we're talking about a defined benefit pension scheme (as seems likely) "their money" doesn't go back to their employers; it remains in the pension fund and is used to pay benefits to all the former employees. In essence the people who die young subsidise the pensions of the people who live to a ripe old age. And the company subsidises them both - the company will have paid in far more on your FIL's behalf than he ever paid in himself, and the company doesn't get that money back either.

In any event the notion of it being "their money" is to misunderstand the point of these schemes. There was never a "pot" that "belonged" to your father in law. He paid into the pension scheme, and in return the scheme promised to keep paying him once he'd retired - whether he lived to a hundred or whether he died the day after he retired. For most people this is a very valuable benefit as it gives them certainty and means that they never have to worry about running out of money during retirement - though I appreciate it might not feel like that if you are one of the unlucky ones who dies shortly after retirement.

Many schemes do have provision to keep paying after you die to a spouse or to financially dependant children - but generaly not to grown up children or more distant relatives. The point of the schemes is really to provide benefits to retired employees, not to cascade money down the generations.

It's definitely worth revisiting the question of whether your MIL is entitled to any benefits from the scheme, but this will require her, or someone authorised to act on her behalf (through power of attorney etc), to apply and to provide the information that the trustees require. If she can't or won't claim what she might be entitled to, the trustees won't just agree to pay it to someone else instead.