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How to be a survivor

There have been a number of high-profile cases recently where someone has not got a survivor&#39s pension which they would have got if they had been married to their partner.

It is important to stress that the problem exists regardless of the couple&#39s sexes or sexuality. Pension practice has not kept pace with the developments in society. This must and will change, the only doubts being how quickly and to what degree it will happen voluntarily as opposed to through overriding UK or European law-making.

In fact, there is a lot which corporate and individual clients can already do in this area if they want to. The Inland Revenue has rules about what it will approve for survivors&#39 pensions. These rules apply to all forms of occupational pension, personal pension and stakeholder.

Where there is a marriage certificate, a survivor&#39s pen-sion can be paid without further question.

Where there is no marriage certificate, the Inland Revenue requires that dependence or co-dependence existed before a pension can be paid to the survivor of a partnership.

Broadly, “dependence” means the survivor depended on the deceased for maintenance of the survivor&#39s standard of living. “Co-dependence” means they both contributed to maintaining their joint standard of living. Note, however, that in the context of contracted-out benefits, there is no such thing as a partner&#39s pension unless that surviving partner has a marriage certificate.

I get the strong feeling that the Inland Revenue does not want to be sucked into adjudicating on whether a particular survivor meets the dependence or co-dependence criteria.

It is up to the decision-makers within the scheme to adopt practices which fall within what the Revenue will allow.

Having said that, if the Revenue suspects that its criteria are being abused in practice, it has the usual strong powers of investigation and sanctions open to it.

There is some quite detailed information available about how big occupational schemes deal with survivors&#39 pensions in practice. The Nat-ional Association of Pension Funds conducts an annual survey among its members and in last year&#39s survey it asked four questions in this area.

What I find most interesting from these survey results is that public sector schemes seem to lag behind big private sector schemes in catching up with society. Perhaps it is a reflection of a more tortuous process to change public section scheme rules, especially where an increase in benefit expenditure is involved.

There is another tool available to occupational, personal pension and stakeholder schemes to deal fairly with survivors who do not have a marriage certificate, at least where the member died before retirement.

It is discretionary disposal of lump sum death benefit. Such lump sums are almost always paid on a discretionary basis to avoid inheritance tax. If the member completes an “expression of wish” form and keeps it updated, whoever is exercising the discretion (usually trustees, but not always) can be heavily influenced towards paying all or part of it to the surviving partner without having to worry about whether that person was a legal widow/widower and had been dependent or inter-dependent.

The marriage certificate issue is also influencing provision of cover in the wider employee benefits market. Below is an example of how our employee benefits team define eligibility for the purposes of claims under spouse and partner life cover set up as part of an employee benefits package.

Many other countries already have formal procedures for registering partnerships. Within Europe, these include France, Denmark, Germany, Belgium, Spain, Netherlands, Norway, Sweden, Finland and Hungary. It can only be a matter of time until this happens here. When it does, all kinds of pension scheme providers may once again be able to say “I will pay out if and only if you have a certificate.” But the piece of paper in question may just as likely be a partnership registration certificate as a marriage certificate.


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