- Scheme member pension
- Scheme member death
- Dependant or nominee drawdown
- Dependant or nominee death
- Successor drawdown
- Successor death
- Successor drawdown.
The funds can continue passing from successor to successor for as long as there are funds that remain in drawdown or for as long as the current rules last.
It is the definitions of nominees and successors which make keeping an expression of wishes up to date so crucial. An expression of wishes can be perfectly valid even if it is out of date, which means that its very existence can cause problems even if the administrator uses its discretion to give the death benefits to more appropriate beneficiaries.
Investors looking to make expressions of wishes similar to the ones identified in the case studies will need to make it clear which beneficiaries should be considered initially and which should only be considered as alternatives.
Some pension providers will have expression of wishes forms which cater for this; if not, most are happy to accept written expression of wishes as long as they do not ask for anything which is against the rules.
Investors should be cautious about trying to cover too many possible scenarios though.
If an expression of wishes is very complex, there is a greater chance of it being ambiguous and problems arising when the benefits are due to be distributed. It is better to simply update the expression of wishes as and when things change.
Case study: Anna
Unforeseen circumstances
Anna was married with two adult children and named her spouse as the beneficiary on her expression of wishes.
Anna and her spouse divorced, but Anna died before updating her expression of wishes. After learning about the situation, the scheme administrator concluded that Anna’s two children would be the most appropriate beneficiaries for her pension. However, because the administrator bypassed Anna’s expression of wishes and the children cannot be classed as dependants, they are only eligible to receive lump sum death benefits.
Expressions of wishes can also cause problems if they do not cater for unforeseen circumstances.
Case study: Ban
Preparing for the unexpected
Ben is married to Fiona, and has a daughter, Tina, who is 51. Ben’s expression of wishes leaves everything to Fiona, who expects to need his pension after his death as her main source of income.
Days after Ben’s death, at age 73, Fiona’s sister also dies, unexpectedly leaving Fiona a considerable sum of money in her will: enough for her to no longer need Ben’s pension to live on. Fiona knows that she could keep Ben’s pension in drawdown, ready to pass on to Tina when she (Fiona) dies. However, Fiona is already 76.
The beneficiary of Ben’s pension can receive the death benefits tax free, but Fiona’s beneficiaries will have to pay income tax.
