The unexpected and untimely passing of a loved one is a life changing event for all concerned. Whether the deceased was the main breadwinner for the family, or the homemaker, or more likely a combination of both, their loss throws a huge stone into the pool of life; the ripples of which are rarely considered until the situation arises.
In the current pandemic environment particularly, I don’t want this blog to be doom and gloom. I merely wish to raise the question; to consider as individuals, and as employers, whether we have a plan for unexpected events in the lives of our colleagues and families. Or are we all too busy to consider this, or perhaps more accurately, its too painful to think about so we don’t.
Our personal lives are far more complex these days. We may have children who live in separate households or in extended families, who need our financial support. As our parents age, are we now also looking to support them practically, emotionally, and financially? What would be the real impact of losing someone in your personal network?
How can we plan for an event one would never even wish to envisage? Writing a Will is something “old people” do. According to the stats, less than 45% of us have a Will and most of us who do are indeed “older” – 75% are aged over 55, only 24% are under 35. Contemplating how we might balance work, and the need to earn an income, alongside supporting our children and extended family, is something we know we ought to consider but why look on the bleak side of life; isn’t this the time to be out there enjoying it?
Many employed individuals benefit from a lump sum payable if they die whilst in employment. This will be highlighted when an individual joins, but when starting a new role, is reading, understanding, and completing the paperwork around such benefits ever the priority?
I also raise the question to the employers sponsoring death-in-service provision: do your employees appreciate this? It is a valuable benefit for your employees. It is even more beneficial as it is written under Trust, with the benefits paid outside the deceased’s estate and therefore free from Inheritance Tax.
As a Trust it needs to be overseen by Trustees. How do you manage this? Who acts as Trustee to your Death-in-Service Trust? Is this a role that members of the management team take on? Do you have a pension scheme whose trustees manage the death-in-service benefits? Does this cover all employees or just those in the pension scheme? And do the Trustees fully appreciate the responsibilities of their role and how to execute them in the event of a death in service?
What happens in the event of a death? Who takes the lead in liaising with the deceased’s personal representatives? Are they comfortable in this role and do they have the skills and experience to provide empathy and support? Many employers find this a difficult role, but it is critical. The deceased may have a strong network of colleagues as friends, and how the employer deals with the deceased’s family will be open to scrutiny.
How do the employer and Trustees capture the private life of their employee to be able to determine to whom the benefits should be paid?
And here lies the key observation. Being written under Trust means that death-in-service benefits should be settled to those who had financial dependency on the deceased. Not as outlined in their Will. Not always as outlined in their Expression-of-Wish form, although it will be considered by the Trustees, assuming one has been completed. Many employees don’t complete their Expression of Wish or do so and then forget to update it as their circumstances change.
In the event of a death, it is the responsibility of the Trustees to undertake the appropriate investigations, to gather information relating to the financial dependency and interdependency of potential beneficiaries, and to make a determination as to how benefits are settled. This investigation must be as full and complete as possible, and robust enough to be defendable if wider claims to the benefits are made.
Employers understandably do not always wish to be embroiled in this decision. They are often more comfortable remaining at arm’s length, outsourcing this responsibility to a specialist. This can be achieved through the insurer market, and their Group Life Master Trusts, or it can be delegated to professional trustees.
A death, and its wider impact, is one of those taboo subjects that we all avoid thinking about until we have to. But I urge you to please think about it, even if only to ensure we can step up to the task of supporting our colleagues and their families when they need us most.
This article first appeared on Pension Funds Insider.