Expression Of Wish

The majority of pension plans are written under a trust deed created by the pension provider, as such these plans are not part of the policy holder’s estate and as such cannot be distributed according to the members will alone, although the will, will be considered by the administrator when benefits are due.

In order to ensure that the members wishes are accounted for each pension provider will ask for an Expression of Wish (EoW) to be completed showing how the member would like the benefits paid to.

An Expression of Wish and nomination form, as it’s officially called, tells the pension provider who should receive the members pension savings (the 'beneficiaries') if they die before all benefits have been distinguished. Although it's not legally binding on the provider, the provider will take their wishes into account when deciding who to pay the remaining benefits to.

If a member does not complete one the benefits available are limited as the nominee may not be entitled to a drawdown and the beneficiary chosen may only be entitled to a lump sum.

1. Keep it simple – don’t use instructive wording which could make it a binding EOW as this may create Inheritance Tax liabilities
2. Keep it up to date – ensure the EOW is regulary reviewed to ensure it meets the members current situation
3. Ensure caveats are added – link to possible nominees to ensure options are available if the intended beneficiary predeceases the member or if the beneficiary decides to forsake the claim.

In simple terms when it comes to payments of death benefits from a pension a beneficiary is someone who receives the members pension when they die.

Other types of beneficiaries include people who receive money from a trust, a life policy or are left money in someone’s will. Beneficiaries can be named in a pension or life insurance nomination form or set out in a will.

Someone will become a beneficiary for a pension when someone names them on their nomination form with their pension provider. 

Being named as a beneficiary does not automatically mean that they will inherit the member’s pension as the scheme is written under trust and the final decision will depend on who the Trustees/Administrators of the scheme.

In the deed that governs the Hubwise SIPP it’s the Administrators who will determine who the beneficiary is.

A beneficiary can be:

• The member’s surviving widow, widower or civil partner,
• Family members including parents, grandparents, children or relatives
• A nomination – this may be any person you know
• A trust
• A charity

The Expression of Wish form acts as the primary piece of evidence the trustees use to make that decision. In most cases, trustees will follow the members wishes unless there has been a major change in their circumstances (like a divorce) that haven't yet updated on the form.

If a member does not complete an expression of wish there may be a number of issues which can cause a delay to the payment being made or a restriction on the options available to the beneficiaries which may result in tax charges depending on the value of the scheme and the age of the member at the time of passing.

There are several potential problems that could arise if the member does not complete an expression of wishes form.

Firstly, the pension may not go to the person that the member intended. Even though the pension provider will assess the circumstances and all supporting evidence including the will, letters from executors and information from them members adviser, they may decide the intended beneficiary/ies does not align with the original members wishes.

When there is no expression of wishes form, death benefits are typically paid to any dependants – this includes anybody that is financially dependent on the member, including their children and, in some cases, their partner.

While paying all the death benefits to their dependants makes sense in some circumstances, the situation is not always so clear.

Say, for example, the member is divorced and remarried, and they have children from both marriages, The pension provider may pass the pension to the members current spouse and children from the second marriage as they are their dependants. 

Consequently, the children from the first marriage may not receive anything, even if the member wanted all children to have an equal share.

Failing to nominate a beneficiary can also make things more difficult for the members family after they pass away. Without an expression of wishes form, the decision made may not align with the member’s own wishes, and this could lead to disputes among family members who feel that they have been treated unfairly.

If an expression of wish is not completed or a potential beneficiary is not noted this may limit the benefit option to a Lump Sum payment which could have tax implications on payment (Lump Sum Death Benefit charge if limit exceeded) and potential Inheritance Tax implications, on not just the initial payment but also for the party receiving as it will form part of the beneficiary’s estate.

If a lump sum is the only option, and if the beneficiary has been declared bankrupt there may be claims on the funds to settle debts, rather than being held in a pension that will fall outside of any claim from creditors.

Just like the member’s will, an expression of wishes form is not something that should be completed once, as a members circumstances change. The member may need to update it to reflect their current situation, which will normally be discussed with the adviser when they have annual meetings/reviews.

For example, they may need to nominate a new beneficiary if:

• They get married or divorced
• They have children
• An existing beneficiary dies

They may also want to ensure potential beneficiaries are noted to ensure that beneficiary has all the payment options open.