In his latest column for SIPPs Professional, SSAS and SIPP expert Martin Tilley, a director at WBR Group, looks at trustee issues.

This article is prompted by a recent determination from the Pensions Ombudsman (TPO) on trustee decisions related to the death of a member of a registered pension scheme.

Few readers will require reminding that one of the factors excluding assets held in a pension scheme from inclusion in a deceased individual’s estate is that the distribution of these assets is a discretionary decision of the scheme’s trustees, made following the death of the member.

Experience has shown that this concept is misunderstood by many individuals who believe either that this distribution will be in accordance with their Will and that therefore an Expression of Wish (EoW) is unnecessary, or that if an EoW is completed it is certain and binding that benefits will be paid in accordance with it. Sadly, the former opinion is simply incorrect (although the Will may form part of the evidence on which a decision may be made) and while, if the second were true, a key feature of the exclusion from the estate of the pension assets would be lost.

Once the need for and understanding of the parameters of an EoW are known, it is clear that the wishes of the member should be recorded in a clear, precise, and unambiguous manner so that the trustees can consider these along with whatever other evidence they might believe is appropriate.

While a decision on the distribution of death benefits should be timely, bearing in mind the potential beneficiaries are most likely in at least a state of vulnerability, the decision should not be expedited to the extent that it prevents the trustees from appropriate considerations and carrying out their duties to the full.

With a regulated product, such as a SIPP, it is most likely that the provider of the product will be the party responsible for the decision. Being a regulated entity, the Financial Conduct Authority (FCA) requires appropriate standards of care. Indeed, the old Treating Customers Fairly regime and the new Consumer Duty requirements enforce that there should be processes in place to ensure suitably good outcomes for the beneficiaries. This should be reassuring, as of course the EoW is the only means for the member to indicate to whom benefits should be paid following their death and the provider will, of course, have very little if any other personal details of the deceased.

But what if the registered pension scheme is a Small Self-Administered Scheme (SSAS)? SSAS arrangements are themselves individually created trusts – there is no “provider of the product” and being occupational pensions, they are not regulated by the FCA.

Members should be reassured though that with SSASs all members should themselves be trustees too. Most usually SSASs accommodate family members, or the directors and senior management of a limited company.

With the above in mind, one might expect harmony with the trustees working together to make considered and appropriate decisions on death benefit distributions. Again, sadly this is not always the case and disputes over matters far less important than distribution of death benefits often abound. This is where a professional trustee can help to provide solutions, making sure individuals are able to put aside personal matters and act in their capacity as a trustee.

It is also incumbent upon the professional trustee to take an equal and proactive stance in fulfilling their obligations as a trustee. To do this requires an active, rather than passive, role regarding all aspects of the scheme’s administration and this is effective from the day the scheme is proposed. It is therefore, in my view, essential that a direct working relationship should exist between the professional trustee/administrator of the scheme and the client, so that the dynamics of the scheme, the membership and extended families should all be known.

Where this relationship does exist, firstly any potential disputes can be managed as soon as possible, and secondly in the circumstances of a member death, much of the information necessary in determining the distribution of death benefits will already be known.

A principal means of ensuring the professional trustee can remain informed and able to fulfil their responsibilities is the scheduling, holding of and attendance at trustee meetings. Continual communication with the client is necessary and only then can the professional trustee “know their client”.

In the same way as insurance is appreciated only in the event of a disaster, when critical situations occur, clients will appreciate that a proactive trustee will be able guide and assist the other trustees in the process to deliver appropriate and agreed outcomes as situations arise.

Martin Tilley, Director, WBR Group
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