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Pension Death Benefits: Expression of Wish


Many people are members of pension schemes which include death in service benefits. Death in service benefits provide benefits should the pension scheme member die prior to retirement, often, a sum (typically three to four times salary) can be paid to named beneficiaries.

What is less well known is that many scheme members, in naming close relatives as beneficiaries, believe themselves to have provided some security for their nearest and dearest, and yet few scheme trustees are actually bound by the members nomination. Trustees still have the right to pay death benefits as they think fit. The members nomination isn't a legal instruction, but an 'expression of wish'.

Now in fairness, trustees will invariably follow the wishes of the member, but there are occasions when the matter can become complicated.

For example, take the situation where a man names his wife as the intended beneficiary from his pension death in service benefits. Sometime later, he divorces and re-marries, but without altering his nomination of beneficiary. A short time later, he dies before retirement. Which wife should get the death in service benefit – the first wife or the second wife?

OK, I won't go into the legal arguments, but you can see that there is room for complications. So, how likely is this sort of scenario? Well, I really don't have the statistics, but in a similar type of story, there's the case of the insurance company which is now dithering over whether to pay £400,000 to a wife or a mistress. What do you think?

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