In its judgment in Punter Southall Governance Services Limited v Benge, the court has approved a trustee decision to pay a death benefit with a value of over £400,000 to a beneficiary who was herself a trustee of the pension scheme.
The judgment considers both the meaning of the term "dependant" and the court's approach to the management of trustee conflicts of interest.
The evidence before the court was that the deceased member, Mr Benge, had been a very wealthy man. The second defendant, who was also a trustee of the scheme, gave evidence that she had been Mr Benge's partner in the years immediately prior to his death, though this was disputed by the deceased member's adult son, the first defendant in the case.
In July 2007, Mr Benge had purchased Swiss chalet for over 2 million Swiss francs which was purchased in joint names for himself and the second defendant. In August 2008 he purchased a UK house known as Oakridge for over £1 million in the joint names of himself and the second defendant. In July 2009 he started to receive a pension from the scheme. The pension was legally classed as an "alternatively secured pension" (broadly a drawdown pension paid to a member aged over 75). Mr Benge died in March 2010.
Under the scheme rules (which reflected tax legislation at the time) where a member in receipt of an alternatively secured pension died leaving a dependant, the only way in which the remaining member's fund could be used without incurring a substantial tax charge was to provide a pension for the dependant. The relevant part of the definition of "dependant" under the scheme rules was a "person who in the opinion of the Trustees is (or was at the date of [the member's] death) dependent or interdependent on [the member] for all or any of the necessaries of life".
Was the second defendant the deceased member's dependant?
The judge said that the term "necessaries of life" takes account of the relevant status of the person concerned. Mr Benge was a very wealthy man with assets of approximately £26 million. The court accepted that although the second defendant owned a separate property in her own name, it was only because of Mr Benge that she had been able to maintain the lifestyle that she maintained in the period immediately prior to Mr Benge's death. This was sufficient for her to fall within the definition of "dependant". The judge commented, "Whatever the nature of the relationship between Mr Benge and the second defendant, the evidence is that she provided companionship, comfort and support." He noted that the definition did not require the second defendant to prove that she was in "a romantic relationship" with Mr Benge.
Conflict of interest
The judge was satisfied that the scheme's professional trustee had correctly identified the second defendant's conflict of interest as a scheme trustee and potential beneficiary and had taken reasonable steps to manage that conflict by "freezing her out of the decision", thus enabling the professional trustee to make the decision free of conflict.