Expression of wishes even more important under consumer duty

According to the Office for National Statistics, in the week ending January 13 2023, 17,381 deaths were registered in England and Wales.

While a spike in deaths is not unusual at the start of the year during the winter months, this figure was 19.5 per cent above the five-year average. 

This should concentrate adviser’s minds on financial planning and particularly what needs to be in place in the event of a client’s death. The inheritance tax benefits related to pension assets on death are of course favourably treated and an area in which advisers can add considerable value by providing reassurance that the assets will go to the right people with minimum fuss.

Central to this is the expression of wish (EoW) form. Without it, the responsibility for paying out benefits will lie with the scheme (trustee/scheme administrator), so explicit direction of where to pay benefits is extremely helpful in avoiding conflicts, particularly in complex family situations. 

The lack of an EoW form being filed may be viewed through the lens of ‘foreseeable harm’.

Due to ambiguity, challenge or no expression of wish form, in the past four years Quilter has seen more than one in five pension death claims be delayed or the option for the pension money to remain invested lost because of no EoW.

As will be the case with most defined contribution pension schemes, without an EoW the scheme administrator’s job of deciding who will benefit from remaining funds on death can become much more involved.

To offer a real example, we had an EoW form for a recently deceased client who, at the point of death aged over 75, had seven grandchildren. However, his form, which hadn’t been updated in years, stated that he had two grandchildren. The result was that we could pay cash lump sums to the unnamed grandchildren, but not in the form of drawdown and therefore subject their entitlement to higher rates of marginal tax than was necessary. 

With the new consumer duty regulations placing a firm emphasis on advisers and providers to avoid causing foreseeable harm, the lack of an EoW form being filed may be viewed through the lens of ‘foreseeable harm’ as it can have huge tax implications when passing on an estate. 

While in most cases the lack of EoW does not create a problem, as an industry we should not be complacent. Even relatively straightforward scenarios can be problematic.