Expression Of Wish

Expression Of Wish

The following article describes what an expression of wish (EOW) is and options in relation to the beneficiaries nominated, including the benefits available to the parties nominated. The SS&C Hubwise EOW form is attached to this article. 

Introduction

An ‘expression of wish and nomination’ form tells a member’s pension provider who should receive their pension savings (the 'beneficiaries') if they die before all funds are exhausted. Although it's not legally binding on the provider, they will take the member’s wishes into account when deciding who to pay the pension benefits to.

In most pensions, the scheme administrator/trustee has the final say over who receives the death benefits of the member’s pension. This is part of the structure that allows the pension to stay outside the estate for inheritance tax purposes.

Please note that following changes due to be instigated by new legislation, pension benefits will fall into a member’s estate for inheritance tax from April 2027. HMRC has consulted regarding the processes required to implement these changes, and draft legislation will be issued in due course. These rules may impact any expression of wishes and how beneficiaries are identified and designated. 

What is a beneficiary/dependent/nominee:

A beneficiary is:

• The person who’ll receive a member’s unused personal or workplace pension when they die. 

A dependent is:

• Someone who was married to, or a civil partner of, the member at the date of the member's death.
• A child who has not reached the age of 23 or, if they have, who remains in full-time education or was dependent on the member because of physical or mental impairment.
• Anyone else who was financially dependent on the member, had a financial relationship with the member of mutual dependence, or was dependent on the member because of physical or mental impairment.

A nominee is:

• Someone who is not a dependant of the member, who is instead nominated by the member to be considered for a nominee's flexi-access drawdown fund or lump sum death benefit.
• Someone nominated by the Trustee and Scheme Operator, but only where:
  • There are no dependents of the member.
  • There are no individuals nominated by the member.
  • There are no charities nominated by the member.

Please note that a member can also nominate a charity as a beneficiary; the charity must be recorded on the UK Charity Register. There are two conditions:

• there are no dependents of the member; and
• the member has nominated the charity as a beneficiary.

If the member leaves no dependents and hasn’t nominated a charity, a lump sum cannot be paid as a charity lump sum death benefit. The lump sum also won’t qualify if the member has nominated a charity, but there is a living dependent.

On the death of a beneficiary who is a dependent, nominee, or successor under a money purchase arrangement, a charity lump sum death benefit can be paid where:

• there are no living dependents of the original member at the time of payment; and
• either it is paid to a charity nominated by the deceased member or, if the member did not nominate a charity, it is paid to a charity nominated by the deceased beneficiary.

What is a binding Expression of Wish

When a member of a pension scheme dies, the scheme administrator/trustees must pay the death benefits to someone. The process of choosing the beneficiary(ies) can either involve the scheme administrator/trustees using their discretion, or the individual directing the choice (known as direction) before their death. The way the choice is made can affect the value of the estate for inheritance tax purposes.

Direction is where the individual explicitly directs the scheme administrator/trustees to exactly who should receive the death benefits from their plan. The scheme administrator/trustees must follow the individual's direction even if the individual’s circumstances have changed.

The value of the death benefits will normally be counted as part of the estate for inheritance tax on their death. 

It's important to note that the individual can change their mind and ask the scheme administrator/trustees to pay the pension death benefit at their discretion instead of at the direction of the pension scheme member. It is important to note that once discretion has been selected it is not possible to change back to using direction.

Opting for direction eliminates the discretionary process in beneficiary designation, transferring the scheme out of trust and into the member's estate. When calculating inheritance tax the value of the estate must be more than the nil rate band of £325,000 for inheritance tax to be payable. The normal spouse’s exemption will also apply if direction is used.

Please note that we are not taxation experts and as such the payment will be made to the beneficiary who will need to report all payments via the relevant returns for the estate.

Expression of Wish: Key Points

Most pension providers and life insurance companies have their own forms for an expression of wish; ours is attached on the link earlier in the article.

Please note that this is not a requirement, and we can accept letters detailing the member’s request.

When writing an expression of wish, it's essential to include certain key details to make sure the member’s request/intentions are clear:

• Clearly state the full names of the people they want to receive the benefits.
• Indicate their relationship to each beneficiary, such as spouse or child.
• If they are naming more than one beneficiary, specify what percentage of the benefits each person should receive.
• Consider including contingent beneficiaries, who would receive the benefits if their primary beneficiaries are deceased at the time of the member’s death.

While not required, they can include a brief explanation or any special instructions regarding how or why they have made these choices. This can help trustees/administrators understand the member’s thinking and follow their wishes.

If contingent beneficiaries are not mentioned this limits the benefits available to those individuals. This also applies if the designated beneficiary decides to forsake their claim and allocate others to receive the benefits. Notably, if others are not noted on the expression of wish those beneficiaries are limited to a lump sum payment, and a dependant/beneficiary pension is not available to them.

Regularly reviewing a member's expression of wishes is crucial to ensure that the nominated beneficiaries align with the member's current personal circumstances. It's common for outdated expressions of wishes to remain unchanged after events like divorces or new marriages, which can lead to delays in settling benefits.