The three golden rules on expressions of wishes

We all know that, and we have probably said these exact words to family, friends, clients and colleagues a thousand times already throughout this coronavirus crisis.

Our lives are currently consumed with the developing situation we face, and it is understandable that certain topics are not at the front of people’s minds.

An expression of wish provides guidance as to who to consider as recipients of the death benefits

Sadly, and while trying to be completely realistic, some unexpected and difficult conversations may need to be had during this time.

However, while it may feel slightly uncomfortable at first, having certain conversations to consider and plan for certain events early enough, could save even more difficult and harder conversations from being had further down the line.

Will and inheritance planning are of course key; however what I specifically want to cover is why it is important to ensure that your clients have a current and up-to-date expression of wish in relation to their pensions.

An expression of wish provides guidance to pension scheme administrators/trustees as to who to consider as recipients of the death benefits.

Once the scheme administrator/trustees have made a decision as to who is to benefit, the recipient, whether they opt for a pension or a lump sum, takes complete control as to how they use the pension fund during their lifetime and who in turn they may wish to benefit from the fund on their death.

As circumstances change through life, clients should be making sure that, as they would with a will, any expressions of wish in existence should also reflect any changes.

In the five years since the introduction of pension freedoms the desire by some to make an expression of wish all-encompassing has led to unnecessary complexity and in some instances increased the risk of potential charges to inheritance tax.

The worst case I have come across to date is where the member laid out sixteen different scenarios as to who he wished to benefit depending on differing circumstances at the time of his death.

Many of these conflicted; presumptions were made that trustees could hold back paying benefits until certain beneficiaries attained a particular age, and as it continued it moved from asking the trustees to consider who should benefit to giving direct instruction.

So, these are my three golden rules when it comes to an expressions of wish:

• The most important point is to ensure it is reviewed regularly and updated if required. There is nothing more problematic than an expression of wish that has not been updated to cover a change in circumstance. One not uncommon example is where the member marries for a second time but has nominated their children from their first marriage. Now it may be the case that it’s still the member’s wish that their children benefit but one can easily see if the expression of wish was not updated after marriage it will be open to challenge. This can cause family friction and delays.
• Keep it simple. Trying to cover a multitude of scenarios does not normally bode well as already mentioned. Over the last five years we have fine tuned our expression of wish based on our experiences and advisers’ comments. The current wording allows for alternative nominees should a main nominee predecease the member or not wish to take up all or part of the benefit. The wording also ensures that any beneficiary has the option to taking a pension rather than a lump sum. This should ensure that the form provides maximum flexibility without having to be over complicated.
• Use the pensions providers own expression of wish form if possible. It has been drafted in line with their scheme rules and if there is an error in the completion of the form it is more likely to be picked up by the pension provider on receipt. If for what ever reason the providers pro forma is not seen as being sufficient then separate legal advice should be taken.

At what would already be a difficult time, the last thing you want is your former client’s family/friends having disagreements and debates around who gets what and when. So stick to the golden rules.

Neil MacGillivray is head of technical support at James Hay