MyCompanyPension.co.uk - Helping members of occupational pension schemes to better understand their benefits.

23rd November 2017
:: Adviser | Works for all advisers | Your client bank

 Your clients bank
Your client bank
 
Apart from the obvious categories of members that are entitled to benefits from an employment based pension scheme (active, preserved, pensioner - not to mention ill health or those already in receipt of survivors' benefits) here’s a list of other people who may potentially be entitled to benefits:

Do any of these situations match people in your client bank?
 
  • the spouse or widow(er) of a scheme member
  • the civil partner of a scheme member
  • a person who has a pension sharing order in relation to an earlier marriage 
  • the child of a scheme member
  • someone who is financially dependent (e.g. parent) upon a scheme member
  • someone who is financially interdependent upon a scheme member (e.g. a long standing flat mate)
  • someone who cohabits with a scheme member
  • someone who is separated from a scheme member  
Many of your clients will fall into one of these categories. Even where your client is not directly a scheme member, establishing other relationships is essential as your client may be entitled to valuable benefits on the death of a scheme member.
 
Record Keeping
 
Keeping your records up to date is important. Below, we take a quick look at some relatively simple reasons why your clients may be entitled to pension benefits from one type of employment based pension: a defined benefit scheme, why the benefits available may sometimes change and why it's important for you to monitor these.
 
Your client bank will be in a constant state of change as each year there are approximately 500,000 deaths (all ages), 600,000 live births, 300,000 marriages and 150,000 divorces.
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Demographics - Defined Benefit Schemes1
 
Total estimated membership - 14.8 million    
26% - Active Members
41% - Preserved Members
33% - Pensioner Members
Given the number of members entitled to benefits a significant percentage of the population who would seek your help are eligible for benefits directly or indirectly from a defined benefit scheme. There are many millions more with money purchase arrangements.
 
Perhaps as important, and most usually overlooked are the millions of people who are dependants of scheme members and who would qualify for benefits on the death of a member. This is because a majority of schemes provide benefits to a surviving spouse (or civil partner). Many schemes also provide dependants benefits.
 
Your client may have moved jobs
 
Changing jobs doesn’t always mean clients become eligible to join another employment based pension arrangement – but it is prudent to check. A large proportion of defined benefit schemes, for example, are now closed to new members.
 
If your client was an active member of a pension scheme, moving jobs probably means a change of status to preserved member. This can lead to some significant - or sometimes very subtle - changes to benefits. Any death-in-service benefit for example, is likely to have ceased immediately or shortly after leaving.
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Your client has been promoted
 
Promotion may lead to an invitation to join a particular section of a scheme or alternatively move to another scheme. Many employers provide ‘works’ or ‘staff’ schemes but have different schemes for ‘executives’. Such changes can occur at any level of the managerial ladder but high net worth clients may be the most affected by changes to benefits.
 
Your client may now be eligible to join a scheme
 
Some schemes require employees to have been employed for a minimum period of service before becoming eligible for scheme membership. Your client may not have been eligible to join a scheme when you completed the Fact-Find.
 
Your client is/has divorced
 
There were over 153,000 divorces granted in 2003. Some employment based pension schemes (most likely defined benefit schemes for this example) only pay a survivor’s pension to the spouse the member was married to whilst an active member of the scheme. If your client is a preserved or pensioner member of a defined benefit scheme and has divorced since being an active member then this could affect the benefits payable on death. The same is true if your client is married to or is a partner of a member of a defined benefit scheme.
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Your client has been married more than once
 
If your Fact-Find only asks about current marital status, and does not identify whether your client had a previous marriage you can miss benefits payable on death where your client is a member or married to a member of a defined benefit scheme. See ‘your client is/has divorced’.
 
Did you ask about your client’s partner?
 
Your client may not be a member of an employment based pension arrangement – but does your Fact-Find ask about whether his/her partner is?
 
Many pension schemes provide valuable survivors’ benefits which your client may be entitled to, so where your client is in an established relationship you need to find out what benefits are provided and to whom. This can include unmarried partners and cohabiters.
 
Your client isn’t married and doesn’t have a partner
 
Many pension schemes (albeit usually defined benefit schemes) provide benefits for anyone who is financially dependent upon a member. Whilst your client may not be a member of a defined benefit scheme, if your client is financially dependent up a scheme member there may benefits available on death.
 
Similarly, benefits may be available to your client if he/she is financially interdependent with a scheme member (e.g. flat mates), so your Fact-Find needs to have established this.
  
Your client is married but has another partner
 
Most trust based pension arrangements will have discretionary powers, although the degree of discretion for the trustees and the circumstances in which these powers may be used will be detailed in the Rules. An example of this situation is where a scheme may provide death benefits to a scheme member's partner even though the member was married at the date of death. This could be because at the time of the member’s death, the partner was financially dependent or financial interdependent upon the member (e.g. where the member was paying rent or mortgage on his/her partner's residence).
 
Summary
 
It’s quite easy to look at your client bank and think that there are few clients who have benefits within an employment based pension scheme. However, when you begin to look deeper into how a pension schemes can extend its coverage (especialy defined benefit schemes) – mostly through death benefits – a large amount of your clients may have substantial entitlements in these schemes.
 
 
 
1 Source: The Pensions Regulator and the Pension Protection Fund; The Purple Book, page 19, December 2006.
Comment: Total estimated membership is extrapolated from scheme survey results. Some people may have more than one pension entitlement.
 

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