Council rules limit death sum

BARBARA Scott-Harman and her husband thought they had worked out what would happen in the event of his death, writes Vivien Goldsmith.

Mrs Scott-Harman is American and planned to return to the United States if her husband should die. She was content to have Mr Harman's pension from his job as an assistant housing benefits officer with Lambeth Council in London, plus the lump sum death- in-service benefit.

Mr Harman made out his will at the same time as sorting out his mother's probate, and confirmed to Lambeth that his wife was to be his beneficiary rather than his mother.

The couple married in December 1990. Nearly two years later, aged 54, Mr Harman died unexpectedly from liver and kidney failure.

But things did not work out as planned. The death grant was pounds 13,656 - one year's salary. As it was more than pounds 5,000 Lambeth said the scheme rules, in line with the usual probate law, dictated that it would have to be paid into the estate. As the Lambeth pensions handbook did not mention this rule, Mr Harman had not been aware that his plans would go awry.

The council is now going to amend the handbook to alert staff to the rule. A Lambeth spokesman said: 'This is a great shame. But rules are rules.'

Mrs Scott-Harman collected the pensions handbooks from all the London boroughs and discovered that the others warned employees about this rule. So she started legal action against the estate under the Inheritance (provision for family dependents) Act. She settled out of court for pounds 7,250, which left her a little over pounds 5,000 after legal fees.

Local authority schemes do not have trustees with the same discretionary powers as most private schemes. So there was little scope for making amends.

Colin English, marketing director of GM Benefit Consulting, said that in the private sector the trustees who look after the pension scheme also take care of the death-in-service benefits. Employees will be asked to complete an expression of wishes form to guide the trustees.