The problem arises where people have told a pension scheme that they want any payments after their death to go to a first spouse but they subsequently divorce, remarry or form a new partnership. Unless the paperwork with the scheme is updated, there is a risk that any benefit for widows/widowers etc. will go to the ex-partner. Royal London has today (25th Feb) published a guide which explains the different sorts of pension benefits which can be payable when someone dies and how to make sure the right person gets them when you are gone.
When joining a pension scheme members are asked to fill out an “expression of wishes” form which outlines who should receive any death benefits. Trustees and pension providers will consult these forms when deciding how to allocate pension death benefits alongside consulting wills and speaking to family members. However, these forms are often not updated to reflect people’s changing personal circumstances such as divorce or remarriage meaning that an ex-partner could be in line to receive pension death benefits.
The average person is expected to have 11 different jobs during their working life and could easily have as many different pension arrangements. While scheme trustees and providers will make efforts to consult the deceased’s will, speak to colleagues, family etc., in cases where the deceased has not worked for that company for many years it can be difficult to find these people. That could mean the pension goes to an ex-partner when the deceased could well have been living with, and had a family with, someone else.
Data from the Office of National Statistics for 2016 shows that:
At least 1.3 million people aged between 55 and 64 have divorced and re-married
A further 0.3 million people in this age group are cohabiting after having been previously married.
A further 0.2 million people in this age group are cohabiting having never been previously married.
Based on the Wealth and Assets Survey, we estimate that around 42% of this age group have pension rights, suggesting that over 750,000 could be affected.
Helen Morrissey, personal finance specialist at Royal London said: “Over the course of our lives, many of us will be in a number of different relationships. The person we want to receive any pension benefits after we are gone is likely to change over time. But if we have not told all of our past pension schemes about our new wishes and our new circumstances, there is a risk that the wrong person will stand to gain. It is important that people make sure that all of this information is kept up to date”.
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