Client Case Study (#01)

by George on March 25, 2013

CancerIFA Client Case Study

My own encounter with throat cancer in 2007 has led to a string of referrals asking me what to do when diagnosed? Mostly, these are from other financial advisers (my client has cancer, what do I do?) GPs and more rarely from the cancer sufferer themselves. Typically, this has resulted in an exchange of emails or phone calls and no contact afterwards, but this changed in January.

Another Enquiry

A short email arrives from a lady who has found me after doing some research on the internet where I have my own general blog + I am active on Twitter @cancerifa She asks me: “What happens to pension benefits if you die before taking them? Do they die with you?” The answer here is usually No, they don’t, but more of this later. Over a few days, we exchange a string of emails where my answers include links to sites where she can sort out the issues herself, and it looks like no regulated advice will be needed.

She is in hospital, suffering from cancer for the third time and tells me she has only weeks left. Her last hope is another round of chemo with only a 10 per cent chance of a cure. We have one short telephone conversation where she is in an oxygen tent with her speech being relayed by a friend and I can just hear her whispering in the background.  She asks me, “Can I trace her pension benefits please?” House moves and hospitalisation have left the relevant pieces of pension paper in boxes, so no detailed information is to hand. She does not want to do the letters herself so can CancerIFA do this?

So far, charging has not been in my mind but mindful of how long this exercise can take, we agree on a fee with half paid up front. A list of employers and dates follows where about half look as if there might be a pension benefit. Fortunately, we do have the name of the longest employer and I get the address of the trustees. Letters of Authority are signed and returned. Fortunately, the lady still has capacity to sign letters and when I raise the issue of Lasting Powers of Attorney her reply is that she still has her marbles and having trained as a solicitor for a while, understands this stuff.

A letter goes to the pension administrators who phone me a couple of days later to tell me that they have my letter. They wish to prepare a projected pension benefit statement for the lady and ask me for likely life expectancy? I remind them that this is likely to be only weeks, so a complicated actuarial exercise showing what might happen in say, 5 or 10 years is unlikely to be of use to anyone. Couple of days later, a letter turns up where the trustees are prepared to make a serious ill-health lump-sum payment of around £23,000 and give a deferred pension to her husband. Curiously, there is no CETV or Pension Transfer Value, so this is requested.

What’s it Worth?

About this time, the BR. 19 audit comes in showing that she has made enough NI contributions to earn the full Basic State Pension with a heart-warming bonus of 69p a week from her Graduated Pension/S2P contributions – payable in a couple of year’s time.

Days later, the CETV comes in showing a Pension Transfer Value of around £70,000. But there’s a catch. If she dies before the Scheme Retirement Age (still two years away) her husband will still receive a deferred pension, but she will receive no lump-sum - the pension benefit actually does die with her. The benefits here are in a Defined Benefit Scheme where the value of the pension is maintained by the (former) employer.

This seems especially cruel as the lady will not receive any State Pension either, but is confirmed by the pension trustees a few days later. There are now three choices:

1) Do nothing, but then most of the pension benefit will be lost

2) Transfer the whole benefit valued at £70,000. This means that the husband will lose his deferred pension, but he is not aware of it anyway and it does not worry her. Once transferred to a new scheme, a serious ill-health lump-sum payment can be made with the whole £70,000 paid out to her. She could then pass this on to her beneficiaries directly.

3) Take the Serious Ill-health Lump-sum offered with the deferred pension for the husband

Regulated Advice

Pension Transfers involve regulated advice which CancerIFA does not do, so it’s time to pick up the phone to my former colleague who does do transfers. Given the choice, the lady would obviously prefer a £70,000 lump-sum than the £23,000 with a deferred pension for her husband, but there is not enough time to process a pension transfer. After a long chat with my former colleague, the serious ill-health lump-sum payment as first offered by the pension trustees is the only sensible option. The exercise has therefore turned into a pension rescue mission, so it becomes a matter of getting the right pieces of paper in the right place while she is alive.

We need four certificates  – 3 birth and one marriage. Cost varies from £25 to £60 each depending on dispatch times, so which service should we use? She quickly texts back ‘Use “Fastest” Delivery’. These are ordered online and arrive two days later, but the Marriage certificate takes a day longer to arrive.

We also need confirmation of life expectancy from her doctor who insists on using snail mail, but all pieces of paper eventually arrive and are forwarded to the trustees. Then, in spite of having known about this case for weeks, the trustees decide to check with their legal people which causes extra delay.

The lady is getting desperate. She wants to give the lump-sum to her son and a text says ominously “I need to let go” and it goes quiet.

The cheque is posted but only arrives on the day she dies – time from first contact to client passing on – 57 days. We never meet, but the exercise is very worthwhile for her family. Total costs are £840 including CancerIFA’s fees, but pension cash benefits recovered are over £23,000. The husband will still receive a small pension in two year’s time.

Main point here? Had the client not taken the initiative, her pension lump-sum would have been lost.

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