Leicestershire County Council Pension Fund has introduced additional requirements for legal guardians responsible for children’s pensions and death grants, where the guardian’s nomination has been the subject of dispute.
Children’s pensions are paid to a natural or adopted child who was born before, on, or – in the case of a natural child – within 12 months of the member’s death.
Stepchildren who had been accepted as part of the family by the deceased member and who are dependent on the member are also eligible for the pension. Like other Local Government Pension Scheme pensions, children’s pensions rise every year in line with inflation.
Death grants are also paid out to nominated family members of the deceased’s expression of wish form, to personal representatives, or to any individual who appears to have been a relative or dependant at any time.
I’ve never seen a scheme have a policy of insisting that there was a legal guardian appointed
Liz Graham, Squire Patton Boggs
Less security
The £3.9bn Leicestershire fund previously asked children’s guardians to set up a trust fund for the payment of death grants.
According to a report by the fund, following national changes to children’s bank accounts and trust funds, individuals who set up such an account were given access to the contents of the account. They would not require the child’s knowledge or agreement.
Ian Howe, pensions manager at Leicestershire County Council, said: “The security of that money for the children has now effectively been somewhat lost, because the person who sets that account up can effectively open that account back to get the money out.”
A handful of families expressed “an element of distrust with the person setting up the account” in the case of Leicestershire, the report said.
The fund has therefore taken steps to ensure that, in the case of family dispute, the legal guardian must produce a copy of the document or court order confirming their appointment.
They must also sign a declaration to confirm they are setting up an account in the name of the child, and that the money will be used in the best interests of the child.
Howe said the family disputes over the appointment of a guardian were resolved, and there is no evidence of funds being used against the interests of a child at Leicestershire County Council.
The pension fund learnt of the changes to trust fund access and drew up plans to improve the security of its death benefits when it encountered the first family dispute in the spring of 2017, Howe added.
Eligible children
• A natural or adopted child who was born before, on, or – in the case of a natural child – within 12 months’ of the member’s death, or
• A stepchild or a child accepted by the deceased member as a member of the family (excluding a child sponsored by the member through a registered charity) who was dependent on the member at the date of death.
In addition to the above, eligible children must also meet the following conditions:
• Be under age 18, or be aged 18 or over and under 23 and in full-time education or vocational training, or be unable to engage in gainful employment because of physical or mental impairment and either:
• Has not reached the age of 23, or
• The impairment is, in the opinion of an independent registered medical practitioner, likely to be permanent and the child was dependent on the deceased member at the date of death due to that mental or physical impairment.
Source: LGPS
Schemes operate death benefits differently
Under Section 5 of the Children Act 1989, a guardian can be appointed by a parent who has parental responsibility for the child, by someone who is already a “special guardian” or guardian of the child, or by an order of the family court.
But Liz Graham, partner at law firm Squire Patton Boggs, was unfamiliar with Leicestershire’s method of administering these benefits.
In Graham’s experience, schemes normally allow the lump sum to be paid into a separate trust, which is specifically set up to take this payment and is administered by more than one trustee.
These trustees can range from people within the family, to independent candidates such as a solicitor.
“It involves a bit of legwork,” Graham said.
“The guardian route is a new one for me. I’ve never seen a scheme have a policy of insisting that there was a legal guardian appointed.”
Doubts exist over family trustees
Whether a single guardian is selected or a group of trustees assembled, there might be some cause for concern where those in charge of death benefits for children have not been trained or are not independent from the child.
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Martin Jenkins, a partner at law firm Irwin Mitchell’s pensions team, said: “The difficulty with making a payment into a trust is you need to be satisfied that it’s effective, and the trust will be administered for the benefit of the children. I guess there’s an element of hope in making a payment to a family trust where there may be uncles or aunts who are acting as trustees.”
Questions regarding investment expertise, and whether the money will be used for its intended purpose, will hang over these trustees, Jenkins added.
