The Pensions Ombudsman found Royal London had been reasonable in its decision to not pay out the full death benefits to just one individual.
Ms S had argued that as she was named as the beneficiary, she was entitled to the full amount which would serve to cover any debts left by Mr Y.
In 2011, Mr Y set up a personal pension with Royal London and nominated Ms S as the sole beneficiary in the event of his death but the payment of the benefits was “at the discretion of the scheme administration”.
The nomination form signed by Mr Y stated: “I would like you to use your discretion when distributing the benefits under my plan and consider paying the value of my plan to the person or persons named here.
"I understand that although you will take account of my wishes, you are not bound to follow them.
Mr Y passed away in 2015 and following this Royal London wrote to Ms S in relation to a claim for his pension.
The letter stated that Royal London did not believe that Mr Y and Ms S were in a relationship when he passed so was contacting her to see whether she still wished to be considered as a beneficiary of the death benefits.
She responded with an explanation of her relationship with Mr Y and argued he wanted her to be the beneficiary as otherwise he would have changed the wording. He had met his financial adviser annually, she said.
In August 2015, Royal London told Ms S that the claim was payable at its discretion.
It said: “When exercising our discretion, we must give proper consideration to all potential beneficiaries and their circumstances.
“We can only do this once we believe that we are in possession of all the relevant details. We are only able to base our decision on the evidenced facts that are presented to us.”
Based on the information it received, the firm decided to pay 50 per cent of the death benefits to Ms S and 50 per cent to Mr Y’s youngest son.
Ms S contested this but Mr Y’s family then provided further evidence to Royal London and argued that Mr Y would have wanted the benefits split between his three sons.
After considering the evidence, Royal London wrote to Ms S in July 2016 to say that she would receive one third of the death benefits and Mr Y’s youngest and second eldest sons the remainder.
In February 2018 Ms S complained to Royal London and in September 2018 Royal London apologised for the length of time it had taken to complete the review but said that the original claim took time to ensure that all known beneficiaries were considered.
It said whilst the application named Ms S as Mr Y’s named beneficiary, the distribution of the benefits would be at Royal London’s discretion in accordance with the scheme rules.
Therefore, Royal London was not bound by Mr Y’s wishes. It felt that after reviewing the collated evidence, the decision was appropriate and so no adjustment was to be made. However, due to the time taken Royal London offered Ms S £500 for the inconvenience.
The complaint was then taken to the Pension Ombudsman.
It said that it was not for the ombudsman to say what should be decided unless the decision by Royal London was so irrational that no-reasonable decision maker could have reached the same decision.
But the ombudsman could have asked Royal London to review the matter again if it deemed its decision had been reached without proper consideration of all the information concerning potential beneficiaries.
The Pensions Ombudsman found Royal London had fulfilled its obligations and reviewed all the relevant information.
Therefore its final decision was deemed reasonable and no further actions were needed.
amy.austin@ft.com
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