In a recent decision dismissing a complaint against Hargreaves Lansdown Asset Management (“HLAM”), the Ombudsman has ruled that it was reasonable for HLAM to delay the payment of death benefits whilst potential beneficiaries provided information which may influence HLAM’s decision as to who should be the beneficiary.
Mr Bunn, Mrs Barnicoat’s unmarried partner, was a member of the Hargreaves Lansdown Vantage SIPP and had two adult children and several grandchildren from a previous relationship. Mr Bunn died on 14 September 2012, having completed a death grant nomination form in March 2012 in favour of Mrs Barnicoat, who was not a beneficiary under his Will which named his children as executors.
The SIPP’s rules gave its trustees, HLAM, discretion to pay death benefits to a wide range of potential beneficiaries, including anyone the member had nominated, his relatives or a beneficiary of his estate. HLAM had been provided, by Mrs Barnicoat, details of the relationship and her financial position. The children, however, had informed HLAM that the relationship had in fact broken down and that there were financial irregularities around the time Mr Bunn died involving unauthorised bank account access and the proceeds of a property sale for which time was needed to obtain evidence.
HLAM did not consider the nature of the financial irregularities alleged to be relevant to its decision as to whether to follow the nomination form. However, in light of the serious nature of the allegations, including fraud, it did allow the children time to provide new evidence in order to demonstrate the relevance of their allegations, and also agreed to maintain confidentiality and not to give copies of the evidence, which later included medical reports, financial transaction records and details of a potential police investigation, to Mrs Barnicoat.
HLAM informed Mrs Barnicoat of the delay on 1 March 2013, apologising for the same and offering £500 in compensation for any distress and inconvenience caused. It also informed her that unless additional evidence was provided by the children she would receive the death benefit as sole beneficiary.
HLAM pressed the children to provide further evidence between April and August 2013, setting 14-day deadlines on two occasions, although the children continued to request further time in order that they could instruct solicitors, await probate, and liaise with police, a private investigations agency and fraud departments at several financial institutions.
Solicitors instructed by Mrs Barnicoat complained to HLAM that they had provided little information in respect of the allegations that had been made. HLAM offered to make Mrs Barnicoat an interim payment during this period, which she twice rejected as she thought she would have to repay any such payment if she was not ultimately awarded the death benefits.
On 28 August 2013, HLAM informed the children that they could no longer delay the matter as they had not provided any further relevant evidence. It also informed Mrs Barnicoat’s solicitors that she was the sole beneficiary of the death benefit. After considering further submissions from the children, HLAM paid the benefits to Mrs Barnicoat on 9 September 2014, which she used to provide a capped drawdown pension plan of £3,727 a year beginning on 1 February 2014.
Mrs Barnicoat claimed that the delays caused her financial loss because she had to use her savings for day to day expenses, at the time her pension plan was secured annuity rates had fallen and she had to engage the services of a solicitor. She argued that the process could have been expedited had she been furnished with the detail of the children’s claim and been allowed to counter the ‘unfurnished allegations’.
Mrs Barnicoat’s complaint was dismissed.
In deciding which beneficiaries should receive the death benefit, HLAM were not bound to consider the beneficiaries equally and could use their discretion. In doing so they were required to consider all of the relevant facts whilst ignoring those that were irrelevant.
HLAM had to check when the nomination form had been completed by Mr Bunn, and whether there had been any changes in Mr Bunn’s personal circumstances that could cast doubt on the continued validity of his expressed wishes. This included the consideration that a failure to complete a new nomination form where a change in personal circumstances had occurred was not due to oversight.
In the light of the allegations made, HLAM had to investigate the matter thoroughly, fairly and reasonably in order to establish all of the relevant facts. They also had to take care in relying on reports from individuals who stood to be affected by their decision. Under HMRC rules they had up to two years in which to decide how to exercise their discretion after making proper enquiries.
The decision was not clear cut, with a range of decisions available to HLAM, none of which could be regarded as ‘right’ with all the others being ’wrong’. The Ombudsman found it was reasonable to allow the children additional time to conclude their investigations and to comply with the request not to disclose the reasons behind the investigation to Mrs Barnicoat.
Mrs Barnicoat was found not have mitigated her loss as she refused the interim payment. She also did not need to engage a solicitor, particularly as involvement of the same did not affect HLAM’s decision. HLAM had offered £500 to Mrs Barnicoat for the “significant distress and inconvenience” that had been caused in dealing with the matter, and this was found to be a reasonable amount in the circumstances.