Sipp providers have warned advisers they should be checking client's death benefit nominations regularly as some providers are not requesting updates from their clients.
The decision as to who benefits are paid on death is usually decided by the pension administrator, trustee or provider. Expression of wish form nominations will generally be the primary evidence of who the deceased member wanted to pass their pension to.
However, Dentons' director of technical services Martin Tilley said some providers are not proactively requesting the update of nominations.
‘This is odd since it is in their interests to make sure they have the most up to date and accurate [information] so their decision process is as efficient as possible,’ he said.
‘Nomination forms should be prompted by advisers to their clients to avoid future difficulties… Clients won’t remember to do this so advisers must take the lead.’
A technical newsletter issued by Dentons said: ‘Advisers should take the opportunity at regular client reviews to check the lodgement date of the latest nominations with historical providers, and should check that these old policies have the necessary facilities to pay death benefits in accordance with the widened death benefits options introduced from April 2015.’
Tilley added: ‘Historic old policies are most at risk, even if they are reviewed by the adviser and retained, then the nomination must still be reviewed periodically.’
A recent Pensions Ombudsman determination also highlighted the implications of failing to keep nominations up to date. In the case, an out of date nomination resulted in a disputed payment of benefits and the delay of payment to the correct beneficiaries.
James Hay head of technical support Neil MacGillivray said failing to stay on top of clients' life circumstances could end up with family disputes over who gets the cash.
'Advisers should review their client nominations in relation to pension death benefits on a regular basis. Failure to do so, particularly where the member’s personal situation has changed since completing a nomination, can create delays in making payments on the members’ death and create family friction at what is a distressing time.
'Also, for high net worth individuals ensuring that their nominations are kept up to date in order to maximise tax planning opportunities is a must do. Not reviewing their nominations could lead to lost opportunities to preserve family wealth down the generations.'