The Law Commission has published a Consultation Paper about the law of intestacy and family provision claims on death. Surprisingly, it proposes that benefits from pension funds could be the subject of family provision orders made by the court. This would allow courts to override scheme rules about who should receive pension or lump sum benefits following a member’s death, so as to order the scheme to pay the benefit to a different dependant of the member’s.
Whether or not an individual leaves a valid will, certain family members and dependants may apply to court for reasonable financial provision from the estate. This is known as a claim for family provision. Assets from pension funds currently fall outside the scope of the laws of intestacy and family provision claims.
The Law Commission sees its proposals as building on the pension sharing legislation, which allows a court to order pension fund trustees to pay part or all of a divorced member’s pension rights into a pension arrangement for his or her ex-spouse.
Our own view is that the proposed change would be inappropriate – or at the very least that the Law Commission needs to think a good deal harder about how to ensure that orders like these do not increase the actuarial cost of benefits under a scheme, about the administrative costs that its proposals could impose, and about the disadvantages that the proposed change in the law could cause to schemes and beneficiaries. Trustees commonly try to pay a discretionary death benefit quickly so that a beneficiary can have urgently-needed financial support following a member’s death, and their ability to do this could be prejudiced if there is a real chance that the court will tell them, no doubt a year or two later, that they should actually have paid it to someone else.