If you are formally employed you might have been required to join your companies contracted retirement scheme, and they would have asked you to nominate a beneficiary for the proceeds in case you die before retirement.
However, if you chose a beneficiary that is not your dependent then the chances are that the retirement fund trustees won’t honour your wishes!
This is according to David Knott, of Private Client Trust, a division of Private Client Holdings, who says that legislation surrounding Retirement Annuities, Pensions, Provident and Preservation funds favours dependants over other beneficiaries, and the fund trustees are then obliged to override your wishes if dependants exist. “Dependants could be a spouse, biological, adopted or step-children, or anyone - such as an ex or a parent - who can prove that they were financially dependant upon you.”
Things can get complicated
Knott highlights an example of when things can become complicated – delaying the payment of funds. “A man nominates his current wife as the beneficiary of his retirement benefits. When he dies the trustees find out that he had young children from a previous marriage. In this instance they would need to consider the claims of all claimants and call for evidence – looking at the financial situation of each claimant before deciding how to distribute the money.”