RP case studies: Getting specific on expression of wishes

In the latest RP case study, Jessica List looks at just how specific a client can be when it comes to expression of wish forms

The situation

Fred Jones is 74 and runs a company with his son Dan. Fred is healthy and has no immediate plans to retire, but he is nonetheless beginning to think about the future of his business, and about making plans in case the worst should happen.

Fred has a self-invested personal pension (SIPP) worth £700,000, including a 35% share in his company’s business premises worth £140,000.

The remainder of the property is owned by his son Dan and daughter Julia in their own SIPPs. Julia has her own business and has no further involvement with Fred and Dan’s company beyond her share of the premises.

Dan’s son Alfie has been working for the firm for a couple of years and is interested in running it with his father when the time comes for Fred to step aside. Fred and Dan have already agreed that Dan will increase his share of the property ownership over the coming years by gradually purchasing Fred’s share; they’ve already confirmed with their SIPP provider that this is possible.

However, Fred would also like to make sure that on his death, any remaining share he still holds is passed to Alfie.

Fred and his wife Margaret have already discussed leaving their pensions to their three grandchildren (Dan’s children, Alfie and Paula, and Julia’s daughter, Flo), as their children are both reasonably comfortable financially and will also inherit from the couple’s non-pension assets. However, Fred would also like to make sure that Margaret could access some of his pension funds if she needed them at the time. 

Fred is unsure how to capture all of these considerations on an expression of wishes. He is aware that it’s possible to complete an expression of wishes as a letter but feels that he would prefer to use his provider’s form if at all possible.

Fred calls his provider to discuss whether his plans are possible. He speaks to a representative, Oliver, and explains that ideally:

  • Alfie would receive Fred’s remaining share of the property, although he doesn’t know how much that will be at the time
  • The remaining funds would be available to Margaret if she needs them
  • If Margaret does not need the funds (which is the most likely scenario), Fred would like those funds to be split between Paula and Flo.

Firstly, Oliver reassures Fred that everything he’s looking to achieve is possible using the provider’s expression of wishes form; it will just require a bit of annotation. He then addresses each of Fred’s points in turn.

Oliver explains that most providers’ expressions of wishes forms, including theirs, will ask for the percentage of the pension to be assigned to each beneficiary as standard. However, as long as a provider is able to pass down assets to beneficiaries (rather than requiring all assets to be sold for the beneficiaries to receive cash), then it should be possible to assign specific assets to a beneficiary instead. Oliver confirms that Fred can still use the expression of wishes form and simply make a note to confirm his wish for Alfie to receive the property rather than a percentage.

Oliver then addresses the plans for the remaining funds. Fred has made it clear that he is almost sure Margaret won’t need the funds, but doesn’t want her to be caught out if something unforeseen happens. He trusts that she would only accept funds if she had a true need for them, as they’ve both discussed their desire to provide for their grandchildren.

Oliver explains that there is a section on their form for ‘alternative’ beneficiaries, which the provider would look to use if the main expression of wishes could not be followed. Therefore Fred could achieve his aim by listing Margaret alongside Alfie as one of his main beneficiaries (to receive everything except the commercial property), and listing Paula and Flo in the alternative beneficiaries section. This would give Margaret the opportunity to accept any funds she may need, and in the likely event that she will not require any, the administrator would then look to pay out those funds according to the alternative beneficiaries section instead.

Oliver adds that this section also allows Fred to specify how to split the benefits between Paula and Flo. This is welcome news to Fred: both of his granddaughters are self-employed but Paula is much further along with her career and he would like to provide greater support to Flo.

Fred asks if he should also make it clear on the form that if Margaret turns down her share, Alfie should still receive the property and it is only Margaret’s share which should go to Paula and Flo. Oliver says that this is how the administrator would normally interpret the form; however, it never hurts to provide additional information for the avoidance of all doubt. If anyone were to question the administrator’s decision, clear evidence about Fred’s intentions can help resolve this as quickly as possible.

The results

Following his conversation with Oliver, Fred is happy that he can complete the expression of wishes form to reflect his intentions. He lists Alfie and Margaret as his main beneficiaries, with Alfie to receive the property and Margaret to receive the remaining funds. He then lists Paula and Flo as alternative beneficiaries to receive 35% and 65% respectively of any funds passed to them.

Fred is confident that his family all understand his intentions as he has discussed this with them, but nonetheless decides that it can’t hurt to include the extra annotations on the form as well.

Fred will make sure he updates his expression of wishes if his circumstances change. However, he’s also pleased that the way the distributions are confirmed on the form means he won’t need to update it as Dan gradually purchases Fred’s share of the property going forward.

This case study is part of Curtis Banks’s ‘Meet the Joneses’ series of intergenerational case studies.

Jessica List is pension technical manager at Curtis Banks