Standard Life Flexible Retirement Plan · CAS-49861-X5J5

CAS-49861-X5J5

Ombudsman’s Determination Applicant Mrs N

Scheme Standard Life Flexible Retirement Plan (the Plan)

Respondent Standard Life Assurance Limited (SL)

Outcome

Complaint summary Mrs N’s complaint concerns SL’s distribution of the death benefit lump sum arising under the Plan in respect of her late husband, Mr N. Specifically, Mrs N contends that in the circumstances, the fact that SL did not to make any award in her favour was perverse.

Background information, including submissions from the parties The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge there were other exchanges of information between all the parties.

Mrs N is represented by her legal adviser (the Representative).

“If a Member died with a Pre-Pension Date Member’s Fund, the Scheme Administrator will, as soon as practicable and subject to Rules 8.2 and 8.3, pay out the Pre-Pension Date Member’s Fund as an Uncrystallised Funds Lump Sum Death Benefit:

(1) in accordance with any specific provision regarding payment of such sums under the contract(s) applying to the Arrangements in question; or 1 CAS-49861-X5J5 (2) if (1) is not applicable and at the time of the Member’s death the Scheme Administrator is satisfied that the Member directed the Scheme Administrator to pay any death benefit to a valid trust under which no beneficial interest in that benefit can be payable to the Member, the Member’s estate or the Member’s legal representatives, to the trustees of that trust; or

(3) if (1) or (2) are not applicable at the discretion of the Scheme Administrator, to or for the benefit of any one or more of the following in such proportions as the Scheme Administrator decides:

(a) any person, charity, association, club, society or other body (including trustees or any trust whether discretionary or otherwise) whose names the Member has notified to the Scheme Administrator prior to the date of the Member’s death;

(b) the Member’s Dependants;

(c) the parents and grandparents of the Member or the Member’s surviving spouse or Civil Partner and any children and remoter issue of any of them ;

(d) any person, charity, association, club, society or other body (including trustees of any trust whether discretionary or otherwise) entitled under the Member’s will to any interest in the Member’s estate;

(e) the Member’s legal personal representative.”

“… the meaning given in paragraph 15 of Schedule 28 to the Finance Act 2004 as amended to take account of the Civil Partnership Act 2004”.

“A person who was married to or a civil partner of the member at the date of the member’s death is a dependant of the member.

(1A) If the rules of the pension scheme so provide, a person who was married to (or a civil partner of) the member when the member first became entitled to a pension under the pension scheme is a dependant of the member.

Part 2 of the Rules defines “Beneficiary” as:

“…a Dependant or a Nominee or any other person chosen by the Scheme Administrator from the list of beneficiaries described in Rules 7.7 and 8.1, except in the Trustee Deed where this means a Dependant, Nominee or Successor.”

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• Mrs N was considered a ‘dependant’ under the “HMRC definition”, which was “A person who was married to, or a civil partner of, the member at the date of the member’s death is a dependant of the member”.

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• It had reviewed the information provided and explained that, in accordance with the Rules, SL held absolute discretion when paying out death benefits.

• As Mr N did not leave a Will or EOW, the only category Mrs N fell into was as a dependant. However, SL had noted that they were separated for some years prior to his death.

• To determine what constituted financial dependency, SL considered schedule 28 paragraph 15 of the 2004 Act. SL asked Mrs N to provide evidence of financial dependency, for which she was unable to provide satisfactory evidence to establish any mutual dependency.

• After considering the information provided by Mrs N, the information provided by other parties, the Rules, the Plan’s Terms & Conditions, legislation and HMRC Guidance, SL stood by its “original discretionary decision”.

4 CAS-49861-X5J5 • It was satisfied that it had identified all of the correct potential beneficiaries.

• It had fully considered the extensive submissions made by the Representative, which included details of Mr N and Mrs N’s relationship and an associated timeline.

• In the absence of a Will or EOW, the decision not to make an award to Mrs N, in her capacity as a non-financially dependent wife separated from the deceased, was not perverse.

• It identified that “due to human error” its bereavement team had incorrectly informed the Representative that Mrs N would need to show financial dependency in order to be considered a potential beneficiary. As a legally married spouse at the date of death, Mrs N met the criteria of being a dependant and therefore was a potential beneficiary.

• Mrs N was considered as one of the potential beneficiaries; however, this did not mean that Mrs N was entitled to receive any of the death benefit lump sum. Proof of financial dependency was a relevant factor when exercising its discretion.

• The information provided to the Representative in relation to Mrs N’s capacity as a dependant, and SL’s rationale for requesting proof of financial dependency, could have been made clearer.

• It had reviewed its previous decision in respect of the payment of the death benefit lump sum from the Plan in light of the representations made. However, SL remained of the view that its initial decision was reasonable. It was not prepared to alter its original decision.

• In reviewing the case, it believed that it could have made Mrs N’s capacity as a dependant clearer. As she and Mr N were married, she was classed as a dependant and therefore one of the potential beneficiaries that was considered when SL exercised its discretion.

• Requests for proof of any financial dependency were made to all potential beneficiaries as it considered this a part of its decision-making process for the distribution of any death benefits.

• Any decision regarding how a death benefit lump sum should be paid, to whom, and in what proportions, was at the discretion of SL. Once all the potential beneficiaries were established, along with any relevant submissions, a review of

5 CAS-49861-X5J5 Mr N’s personal circumstances at his date of death was undertaken. This included considering who might have been financially reliant on Mr N at that time.

• In exercising its discretion, it gave due consideration to all sources of relevant information, which included relevant information from family members, as well as sources of independent or publicly available information.

• It was grateful for the information provided by Mrs N; however, the process of exercising discretion was not one of claim and counterclaim by interested parties. It was based on weighting up relevant evidence and ignoring irrelevant factors.

• SL did not attempt to evaluate the quality of a relationship between a potential beneficiary and the policyholder, nor would it make any moral judgments. It would not be possible, or appropriate, to evaluate the quality of Mr N’s personal relationships as a way of deciding who to pay a benefit to.

• Taking into consideration the information provided, it was not prepared to change its original decision.

Summary of Mrs S’ position

She left the matrimonial home at the end of September 2014, as Mr N’s abuse of alcohol and drugs, and his violence towards her and their property, had escalated to the point her health was suffering. Mr N repeatedly promised to seek help; however, he did not, so she “could not take it anymore”.

Nothing was ever formalised about their separation nor was divorce contemplated. She had always hoped for a reconciliation and believed Mr N was of the same mind. She maintained a close relationship with Mr N’s family who acknowledged that she had no option but to leave because of how things were.

She and Mr N discussed his options, in regard to his pensions, and she believed he had nominated her as beneficiary. She had nominated him as beneficiary on her various policies. She understood that SL did not possess an EOW, or any form of nomination for her on record.

There appeared to be some confusion in SL’s decision-making process and she, and the Representative, were initially told that she would only be classed as a dependant if she was financially dependent/interdependent on Mr N. However, neither were any of the other potential beneficiaries financially dependent on Mr N.

She understood that SL considered financial dependency as part of their decision- making process. If this was true then she would have expected them to have considered this aspect with all other potential beneficiaries. If they did not, then their decision was perverse.

SL said that it had considered evidence form other parties in making its decision. She believed that if this evidence was received from Mr N’s family, employers or his 6 CAS-49861-X5J5 partner, it was likely that this information was inaccurate. The way in which Mr N’s family behaved towards her after his death caused her great distress. Furthermore, their actions by removing paperwork from Mr N’s flat meant that she incurred additional legal fees in administering the estate.

It was understood that the other beneficiaries did not wish for the information they had provided to SL to be shared with Mrs N. It was unclear how she could make proper representations as to whether SL acted reasonably without sight of all the information considered during its decision-making process. She was unable to determine if the information provided was accurate or untrue.

Mr N’s employer had paid £350,000 to Mr N’s parents. She was curious to know whether or not this information was disclosed to SL.

For reasons unknown to her, Mr N’s family had behaved dishonestly towards her in light of claims being made on the death benefit lump sum. The Representative made this clear to SL. However, in spite of this, SL did not provide any reason as to why Mrs N was not eligible for any of the lump sum.

She did not agree that SL had acted appropriately or reasonably. She would have expected to have received a share of the death benefit lump sum based on the length of her relationship with Mr N and that she had substantially supported Mr N during their marriage as he was inconsistent in paying his share of the household bills. Mr N did not return her share of the flat deposit when he gave up their matrimonial home, which he had promised to do. Further, after their separation, there was no formal separation agreement, nor a financial settlement. If they had divorced, it would be reasonable to suggest that Mr N’s death benefits/pension policies would have formed part of a settlement agreement.

Mr N died intestate, and she was the sole recipient of the estate. His only material asset was his flat, which was still heavily mortgaged with little equity. When other legal costs and debts were taken into account, there would be little to no balance left to be paid out from the estate. She should receive a share of the death benefit lump sum.

Adjudicator’s Opinion

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The Representative, on behalf of Mrs N, did not accept the Adjudicator’s Opinion, and the complaint was passed to me to consider. The additional points raised by Mrs N’s representative are:-

• When SL informed Mrs N that she would not receive a portion of the Plan’s death benefits, it did not outline any reasons how or why it had arrived at this decision. SL did not provide Mrs N with copies of any submissions made by any of the other potential beneficiaries. Without this information, Mrs N was unable to make any detailed representations regarding herself and Mr N, nor was she able to attest to the accuracy of any information provided the other beneficiaries.

• Mr N’s family notified his employer and the funeral directors that he and Mrs N were divorced at his date of death, and that they were no longer in contact. This was untrue as they were still married and, prior to Mr N’s death, he telephoned Mrs N to “leave an affectionate message”. Mrs N still harboured hopes of 9 CAS-49861-X5J5 reconciling her marriage with Mr N as she still loved him. While separated, Mrs N remained in close contact with Mr N’s family. The family were also supportive of why she had to leave Mr N and their matrimonial home. She and the Representative did not believe that the family had provided SL with an accurate overview of Mrs N’s relationship with the family and Mr N before his death.

• Based on any information received from the family about Mrs N and about the nature of her relationship with Mr N, SL should have asked Mrs N if the family’s representations were at odds with her own. Mrs N did not tell SL that she was in a new relationship, so this information must have come from a third party. It was true that Mrs N had been seeing someone on a “casual basis”, however, she would not describe this as a relationship.

• It was clear that financial dependency was given a high level of consideration when SL made its decision regarding the dispersal of the Plan death benefits. SL did not query what Mrs N was likely to receive from Mr N’s Estate. So, SL failed to make proper enquiries before making its decision. It was appreciated that the matter was not based on claim and counter claim, however, when contradictory information is provided it falls to the decision maker to make proper and relevant enquiries before reaching a decision. SL should have considered whether the evidence provided by Mrs N, after it reached its decision and paid the benefit, would have had any bearing on its decision. It was evident that SL did not undertake such an exercise in responding to the appeals.

• SL incorrectly said that for Mrs N to be considered as a potential beneficiary, she needed to be financially dependent, or interdependent, on Mr N at his date of death. The correct position was that Mrs N was considered as a potential beneficiary by virtue of her being Mr N’s surviving spouse, though SL did clarify that this was the case at a later date. It was concerning that SL may have adopted a policy whereby separated spouses were automatically discounted from being eligible for the payment of any death benefits. This would explain why other non- financially dependent beneficiaries received a portion of the death benefits whereas Mrs N did not. If such a policy existed, this would mean that SL fettered its discretion.

• In relation to the wording of Rule 8.1(3)(a) to (e), in his correspondence with SL before SL made its decision, he had assumed that there was a hierarchy in the class of potential beneficiaries. At no stage did SL suggest this was not the case. So, it was difficult to understand how Mrs N did not receive a portion of the death benefits, as a surviving spouse, unless there was a policy in place that required proof of dependency.

• He disagreed that the fact there had been no financial settlement between Mrs N and Mr N was an irrelevant consideration. It was no different from being financial dependent. The fact Mr N owed Mrs N money was not a moral judgment, but a matter of fact of how things stood at Mr N’s death.

10 CAS-49861-X5J5 • Finally, consideration should be given to why other potential beneficiaries who submitted information to SL were not willing to have their submissions shared with Mrs N. While they may have been within their rights to do so, it suggested that they did not want their submissions subject to scrutiny and contradiction. SL failed to consider this.

Ombudsman’s decision

1 Edge v Pensions Ombudsman [1999] EWCA Civ 2013 considered the principles of trustee decision

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I do not uphold Mrs N’s complaint.

Dominic Harris Pensions Ombudsman

5 September 2025

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