The Pensions Ombudsman has dismissed a complaint from a deceased member's partner who argued that a lump sum death benefit held on discretionary trusts should have been paid in accordance with the terms of an e-mail from the member to his financial adviser in which the member set out his last wishes six days before his death (PO-40022).
The scheme was a personal pension scheme. Its rules provided for lump sum death benefits to be held on discretionary trusts. The member had never provided the pension provider with an expression of wish form. Following the member's death, the scheme provider made enquiries from which it established that the member had left a financially interdependent partner and a daughter aged under 18. The provider's enquiries were largely dealt with by the member's financial adviser (IFA) who provided evidence that the member's mortgage had been transferred into the sole name of the member's partner, and that it was the member's wish for his partner to "have all pension plans to allow her to pay off their mortgage (approx. £67,000)". The IFA also said that a separate lump sum death in service benefit of £164,000 had been paid to the member's daughter as agreed by all parties.
The pension provider exercised its discretion to split the lump sum (approximately £17,500) equally between the member's partner and daughter. The member's partner complained that the death benefit should have been solely awarded to her, that the member's daughter had been substantially provided for by the death in service lump sum, and that the member's wish had been for his partner to be the sole beneficiary of the pension scheme. The IFA provided a copy of an e-mail from the member to the IFA sent six days before the member's death in which the member set out his last wishes. The e-mail said, "Pension will pay off mortgage".
The pension provider rejected the complaint on the grounds that the decision as to who benefited from the death benefit was discretionary and that it had considered that a fair decision was to divide the monies equally between the partner and the daughter. It did not treat the member's letter to the IFA as an expression of wish form under the scheme.
The member's partner complained to the Pensions Ombudsman, but the Ombudsman rejected the complaint. He found that the provider had taken account of all potential beneficiaries and had considered how the lump sum should be distributed in accordance with the scheme rules. He was satisfied that the provider had acted within its discretion to make the decision it did. He noted that the provider had not had sight of the member's e-mail prior to his death and that, in the circumstances, the provider had not acted unreasonably in not basing its decision on the information in the e-mail.
This case illustrates the problems that can arise where members discuss their wishes regarding lump sum death benefits with others, but do not inform the scheme trustees. Encouraging members to complete expression of wish forms and review them regularly may help to avoid such issues. In this case the pension provider was able to show that it had made detailed enquiries and made a decision which was reasonably open to it based on that information. This was key in defending itself against the complaint.