Pensions Ombudsman: Ms E PO-22369 ' Ombudsman Overturns SSAS Trustees' Decision On Death Benefit Distribution

• Published date: 21 July 2023
• Subject Matter: Employment and HR, Retirement, Superannuation & Pensions
• Law Firm: Norton Rose Fulbright
• Author: Lesley Browning and Shane O'Reilly

The Pensions Ombudsman has upheld a complaint brought by a beneficiary who argued that the trustees had failed to make a proper decision when distributing her late brother's death benefits.

The late member had been a member of a small, self-administered scheme (SSAS) which was established by himself, a close friend (Mr Allen) and his friend's wife (the Member Trustees). The professional trustee and administrator of the SSAS was Whitehall Group.

On set-up in 2015, the SSAS expression of wish form detailed the member's nominated beneficiaries as his sister (Ms E, the complainant) and Mr Allen, one of the Member Trustees, who were each to receive 50 per cent.

However, the member completed a new nomination form in 2017 shortly before his death nominating benefits to be applied '25,000 to his estate and the remainder (over '250,000) to his sister.

Following the member's death in 2017, there had been a delay in distributing his death benefits. The Member Trustees contested the 2017 change of beneficiaries on the basis that the member lacked capacity. The dispute carried on until they approached the second anniversary of the member's death. Conscious of the possibility of tax charges arising, in November 2019 the Member Trustees followed neither the 2015 nor the 2017 nomination and instructed the Whitehall Group to pay '25,000 to the member's estate, '161,000 to Ms E and the remaining '112,000 to Mr Allen.

Determination

The Ombudsman was highly critical of the role played by all of the trustees and concluded that their decision was a perverse one, which no reasonable decision maker could have made. Emphasising the increased onus on professional trustees, the determination is a clear reminder of the roles and expectations of decision makers when determining death benefits and the Ombudsman noted the following failures by the trustees.

Breach of Edge criteria

Having ruled out the 2017 nomination, the Member Trustees made a decision that reflected neither the 2015 nor the 2017 nomination. The factors they took into account were the two-year tax deadline, the SSAS' liquid funds at the time and their lack of medical evidence of the member's capacity. FollowingEdge, the Ombudsman ruled that these factors were irrelevant and should not have been taken into account.

Incorrect presumption as to member capacity

The British Medical Association guidance provides that there is a presumption of capacity, with a heavy hurdle to displace that a person has a right to distribute...