Death benefits – The case study of Mr S
Mr S was a member of Stanplan A, a Standard Life occupational pension scheme (the Scheme). Under the Scheme Rules the Trustee had the discretion to decide who should receive a lump sum on the death of a member.
Ms D’s complaint was about the Trustee’s decision to award her only 50% of the lump sum benefits due following the death of Mr S while it waited to see if any of Mr S’ family members made a claim for the remaining amount.
Mr S died in March 2016. He left a handwritten will stating that Ms D should be the sole beneficiary of his pension. Mr S had also completed an Expression of Wish form which named Ms D as the beneficiary of the death benefit lump sum. Following Mr S’ death, Ms D sent the paperwork to Standard Life. She explained that she was listed as Mr S’ next of kin and had no details of his estranged family.
In 2017, Standard Life told Ms D that she would not receive any of the death benefits as she was not entitled to them under the Scheme Rules. The Trustee made a decision to award the death benefits to Mr S’ daughter. However, a payment was not made, because she could not be traced.
Ms D challenged the Trustee’s decision, saying that it had refused to consider the will and the Expression of Wish form which she believed was in line with Mr S’ wishes. The Trustee confirmed that the will had been considered but the decision for the payment of death benefits was a discretionary one and it had concluded that the death benefits should not be paid to Ms D.
Ms D raised a complaint with the Trustee and submitted further evidence, following which the Trustee revisited its original decision and decided to pay Ms D 50% of the death benefit lump sum as she was a recognised beneficiary. The Trustee said that the remaining 50% of the benefits would remain with Standard Life for a further two years in case any of Mr S’ family members came forward as potential beneficiaries, in particular Mr S’ daughter.
Ms D then complained to TPO and her complaint was considered by an Adjudicator. The Adjudicator concluded that the first decision made by the Trustee was wrong, as the Trustee had not correctly directed itself in the interpretation of the Scheme Rules regarding whether Ms D qualified as a beneficiary.
The Adjudicator considered that in responding to Ms D’s appeal, the Trustee had, in effect, revisited its initial decision as it may have been directed to do by the Ombudsman. Under the new decision, after the two-year period expired, the payment of the remaining 50% was likely to incur unauthorised pension payment charges that could have been avoided. In the Adjudicator’s opinion, this was not an acceptable outcome. The Trustee had discretion to decide who the death benefits should be paid to. It would only be reasonable for the Trustee to hold back some of the death benefits if it was actively trying to locate Mr S’ daughter, but there was no evidence of this.
The Adjudicator concluded that it was unreasonable to make a decision that only 50% of the death benefits should be paid in case another beneficiary came forward. The Trustee needed to make a clear decision about who the death benefits should be paid to. Furthermore, two years was an unreasonable period of time for the Trustee to simply wait to pay out the remaining benefits, especially when the potential beneficiary was not actively being sought.
To put matters right, the Adjudicator said that the Trustee should reconsider which beneficiary or beneficiaries are entitled to the further 50% of the death benefits. If the Trustee concluded that it should be paid to Ms D, then payment to her should be made as soon as possible. In addition, any potential tax charges due to exceeding the two-year limit for payment of death benefits should be covered by the Trustee. The Trustee should also pay Ms D £500 for the significant distress and inconvenience she had suffered.
Both parties agreed with the Adjudicator’s Opinion.
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