Court approves payment of lump sum death benefit to beneficiary who was also trustee

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In its judgment in Punter Southall Governance Services Limited v Benge, the court approved a trustee’s decision to pay a death benefit worth over £400,000 to a beneficiary who was himself a trustee of the pension plan.

The judgment takes into account both the meaning of the term “dependent” and the court’s approach to managing trustees’ conflicts of interest.

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The evidence in court was that the deceased member, Mr. Benge, was a very wealthy man. The second defendant, who was also a plan trustee, testified that she had been Mr. Benge’s partner in the years immediately preceding his death, although this was disputed by the adult son of the deceased member, the first defendant in the case.

In July 2007, Mr. Benge had purchased a Swiss chalet for more than 2 million Swiss francs, purchased in common name for himself and the second defendant. In August 2008 he bought a UK house known as Oakridge for over £1million in the joint names of himself and the second defendant. In July 2009 he began to receive a pension from the scheme. The pension was legally classed as an “alternative guarantee pension” (basically a withdrawal pension paid to a member over the age of 75). Mr. Benge died in March 2010.

Under the rules of the scheme (which reflected tax legislation at the time), when a member receiving an alternative guaranteed pension died leaving a dependant, the only way to use the member’s remaining fund without incurring a substantial tax burden was to provide a dependent pension. The relevant part of the definition of “dependent” under the rules of the plan was a “person who, in the opinion of the trustees, is (or was on the date of [the member’s] death) dependent or interdependent on [the member] for all or part of the necessities of life.

Was the second defendant the dependent of the deceased member?

The judge clarified that the term “necessary for life” takes into account the relevant status of the person concerned. Mr Benge was a very wealthy man with assets of around £26million. The court accepted that although the second defendant had a separate property in her own name, it was only thanks to Mr Benge that she had been able to maintain the lifestyle she had maintained in the period immediately preceding the death by Mr. Benge. That was enough to bring her within the definition of “dependent”. The judge commented: “Whatever the nature of the relationship between Mr Benge and the second defendant, the evidence is that it provided companionship, comfort and support.” He noted that the definition did not require the second defendant to prove that she had “a romantic relationship” with Mr Benge.

Conflict of interest

The judge was satisfied that the professional plan administrator had correctly identified the second defendant’s conflict of interest as plan administrator and potential beneficiary and had taken reasonable steps to manage this conflict by “excluding him from the decision”, thus allowing the professional administrator to make the decision without conflict.

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