WBR SSAS expert, Martin Tilley recently wrote an article for Professional Advisor to explore the importance of keeping expression of wish forms up-to-date and explain why advisers have an important role to play in the process of wills and estate planning.

The New Year is traditionally the time of resolutions: To get done tasks that have been put off in favour of more palatable pastimes. A frequently quoted task is the provision of a new will, or the review and update of an existing one. Family solicitors will I am sure record an uptake in interest for such services each new year.

However, most person’s second-largest financial asset, their pension, is not covered by their will, as if a trust-based scheme, the asset would ordinarily sit outside of their estate. Whilst those lucky enough to be in a defined benefit scheme may have more prescribed outcomes, the distribution of most defined contribution pension funds on death will be covered by an expression of wish letter, or form of nomination.

A key difference between the documents that influence the distributions is that a will is most usually legally binding. The executors are there to carry out the instructions of the deceased, whereas as the name implies, an expression of wish (EoW) is simply that: An indication to the scheme trustees of the deceased’s preferred beneficiaries. The actual decision on distribution is at the discretion of the trustees which is made after the member’s death.

Is this a good thing? It should be. The making of the initial EoW is usually at the point of creating or joining the pension scheme and reviews are often overlooked, despite sometimes quite substantial changes in an individual’s circumstances. Good pension providers will remind individuals of the date of the last held EoW on an annual basis, but many do not.

Cascading Wealth

With flexi-access drawdown seemingly now the default, an individual’s pensions fund may now last decades after the initial accessing of benefits and in many cases, the cascading down of wealth through generations will see that same fund living well beyond the original individual’s lifetime

It is for this reason that trustees have a responsibility when making their decisions for them to be as informed as is possible. Even a relatively up-to-date EoW should not be blindly followed.

The trustees will need to make any and all necessary enquiries and be able evidence that they have done so and the steps they have taken in coming to their decisions. Obviously, the older the EoW, the potentially longer it will take to make those enquiries and come to a decision. This, at a time when a family might be grieving and in need of the financial support and confidence that a prompt decision would provide.

Role of Advisers

The Pension Ombudsman’s published complaints determinations are littered with disputes about the distribution of death benefits, so providers are quite rightly taking their fiduciary responsibilities seriously.  The trustees however are not able to advise the individual or their representatives at a time when financial decisions may be critical.

Financial advisers will have a key role to play, as do solicitors involved with the drafting of a will.  EoWs and wills should be considered in parallel, not separately at initial drafting and at each annual review of an EoW should be either redated and signed or the review documented and signed so that the pension trustees may rely upon the review date rather than the original signed date as the individual’s last declared wishes

EoWs need not be in any defined format but should be clear, detailed, and actionable. Drafting even general phrases such as “our children” could be ambiguous and relate to children of the current marriage, children of previous marriages or even unknown offspring that appear at time of death.

Similarly, particularly where flexi-access dependants/nominees’ drawdown is actioned, the trustees should not be requested to make payments not permitted within legislation, as this will simply delay and complicate the distribution. For example, the deceased cannot control the fund from the grave.

Finally, and again where flexi-access dependants or nominee drawdown is triggered on individual death, the recipients of those benefits should be asked to complete their own EoW guiding the distribution of any remaining funds on their own death, which should be reviewed and updated in the same way as any original EoW.