The Pensions Ombudsman has held that a surviving civil partner’s inheritance from the deceased member’s estate was a relevant factor to consider when making a decision as to who should receive a lump sum death benefit held on discretionary trusts (Mr T CAS-64304-R5R1).

The facts of the case were unusual.  The deceased member, Mr S, had become a member of a SIPP in January 2019 and completed a nomination form saying that Miss E, a friend’s daughter, should receive 100% of any benefits on his death.  Mr S had also nominated Miss E when he became a member of a previous SIPP.  Very shortly before his death, Mr S wrote what purported to be a will, leaving £50,000 to each of his nieces, £100,000 each to a Ms Y and Ms S and the remainder to Miss E.  However, as the purported will was not witnessed, it had no legal effect and Mr S died intestate.  In 2006 Mr S had entered into a civil partnership with Mr T.  In 2012 Mr T and Mr S had applied for a decree nisi, ie a legal step towards dissolving the civil partnership, but no decree absolute was ever applied for, meaning that Mr S and Mr T legally remained civil partners. Mr T inherited Mr S’s estate with a net value of approximately £550,000 under the law of intestacy.

At the date of Mr S’s death, he and Mr T were living separately and Mr T was not financially dependent on Mr S.  Mr T described the background to the relationship as complex and highly personal.  He provided an e-mail to the scheme administrator explaining some of the issues involved.

The scheme administrator decided not to pay any of the SIPP lump sum to Mr T.  It concluded that one of the factors it should take into account in reaching its decision was whether the potential beneficiaries had been provided for by Mr S in another way, which included the extent to which they would benefit from his estate.  

Mr T complained to the Ombudsman about the scheme administrator’s decision.  One of the arguments he raised was that the scheme administrator had taken into account an irrelevant factor, as it should not have taken into account that he benefited from Mr S’s estate.  The Ombudsman rejected this argument, holding that that the fact that Mr T was the sole beneficiary of Mr S’s estate was a relevant factor. 

Our thoughts

The facts of this case were unusual, but the question of whether trustees making death benefit decisions should consider who has inherited the deceased’s estate is a reasonably common one.  It is therefore helpful that the Ombudsman has confirmed that the question of who has inherited a deceased member’s estate can in principle be a relevant factor for the trustees to take into account when reaching a decision as to who should receive the lump sum death benefit.