Recent Pensions Ombudsman determinations serve as a reminder that death benefit decision-making can be difficult for pension trustees to navigate.
Trustees must be thorough and consider all options, and keep in mind that a will won't always provide an easy answer.
Deciding who receives a member's death benefits can be one of the more sensitive tasks faced by pension scheme trustees. Trustees will often encounter complicated family circumstances that make these decisions far from simple, and aggrieved family members who may be quick to complain. Recently we have seen many complaints by potential beneficiaries being upheld by the ombudsman. Unravelling decisions can be difficult once payment is made, so getting it right first time is important.
No short cuts
Where spouses or children are involved, it is common for trustees not to look beyond these individuals when distributing death benefits, even when there might be other possible recipients. In the recent cases concerning Mr F and Mr L, the ombudsman found that the trustees had failed to properly consider all potential beneficiaries and were therefore not able to make an informed decision. Specifically in the case of Mr L, the ombudsman made clear that although the trustees had approached their decision in good faith and with an independent mind, they had not considered sufficient evidence to reach their conclusion. This highlights that even where trustees have awarded death benefits based on what might be considered clear-cut evidence, in this case that Mr L's partner qualified as a dependant, they still have a duty to look further afield and consider others who might also qualify.
No easy answers
Trustees will often look to a deceased member's will or expression of wish form to help with their decision, but these aren't always as helpful as hoped, or as straightforward as they may first appear. In the case of Mr S, City & County of Swansea Council, as the administering authority of the Swansea City & County Pension Fund, had requested a copy of Mr S's will from his spouse. It then relied heavily on the will when making its decision, but in fact misinterpreted its meaning and did not seek additional information when Mrs S made a complaint under the fund's internal dispute resolution procedure (IDRP). For these reasons the ombudsman found that the council's decision was flawed and should be reconsidered. He also made an award for serious distress and inconvenience. In the case of Mr F, the trustees relied on an expression of wish form which the ombudsman found to be irrelevant as it had been completed in relation to a different company scheme. Expression of wish forms may also be out of date and should not be relied up on without checking that a member's circumstances had not changed.
What is relevant?
The ombudsman makes clear that if trustees can show that consideration has been given to all relevant matters and they have excluded irrelevant matters, they cannot be criticised for their decisions. But how rigorous are trustees in ensuring that they have been made aware of all relevant matters? They will often rely on the information given to them by the scheme's administrators, but they have a duty to make sure that appropriate enquiries have been made in relation to all beneficiaries so that all relevant evidence is before them when they make their decision. In complex cases, advice may be needed on what evidence should be considered relevant, and how it should be interpreted.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
