Simplicity isn't "dumbing down": it’s how we help close the beneficiary gap

Following the launch of Scottish Widows’ new beneficiary nomination process, Lesley Barsanti and Ruth Gilbert explain the practical impact for advisers.  Take a look at how beneficiary nomination can help you deliver the outcomes your clients rely on.

As we consider good customer outcomes in line with the FCA’s Consumer Duty, the question is: “How do we reliably get life cover proceeds to the right people, quickly, in a way real clients will actually use?”  
 

The real problem: an outcomes gap, not a technical debate 

Trusts work brilliantly—when they’re used. But too often they aren’t. Swiss Re’s latest market evidence¹ shows that in 2024 only 21.4% of all new term policies (including joint) were written in trust. When relying on only trusts, this leaves a “beneficiary gap” of around 73% of single own life policies where money may be delayed or misdirected at claim.¹  

Progress is inching forward, but nowhere near fast enough. At the rate achieved over the six years ending 2024, Swiss Re and Insuring Change estimate it would take a further 27 years to close the gap using trusts alone.¹

That leaves a huge vulnerability for families where proceeds risk delay or even misdirection through probate and intestacy. Probate delays are more than just a technical hurdle—they can add stress for families at an already difficult time. Preparing to apply for probate can be a daunting and lengthy process, leaving loved ones to endure an often-stressful wait for the support they need.  This risk can be materially reduced for life cover when proceeds bypass the estate. 
 

Consumer Duty lens: usability is value 

Under Consumer Duty, firms must enable and support customers to pursue their objectives and avoid foreseeable harm. Even with templates and support, many clients and advisers find trust paperwork daunting. The FCA is clear, we must focus on outcomes. If a solution fails at the point of execution, it risks failing the test of real‑world value. Designs that are simpler to complete, and therefore more likely to be used, improve outcomes. 
 

Why beneficiary nomination matters 

Beneficiary nomination is not about replacing trusts. It’s about removing friction, so the right people get the right money at the right time.  

Its value lies in ease of adoption, flexibility, day‑one protection and faster access to funds through probate avoidance. These features reflect a wider market shift towards making life cover work in the real world and reducing avoidable claim delays. 

Modern society has changed how people live, form families, hold financial products, and plan for the future. Modern family structures are increasingly complex. Beneficiary nomination gives control and clarity when needed. 
 

How beneficiary nomination works 

Nomination is built into the application process—no trustees, no witnessing, no separate forms. That simplicity drives take-up, reducing the risk of clients leaving policies unstructured. It can only be added when your client is applying for their policy, this can’t be done later. This means nomination also works for free accidental death and free mortgage cover, which can be vital if an intended trust was planned for after the policy went in force. 

It’s important to note that once a policy has gone on risk with beneficiary nomination in place, this cannot be removed.  However, it can be later superseded by placing the policy in trust as long as the Settlor and their estate are excluded from benefiting. 

Policyholders can change nominees at any time without needing to consult the beneficiaries and without needing a deed with witnesses. 

The death benefit is outside the policyholder’s estate, whilst they can retain access to payments triggered by illness. However, as with a split trust, this can sometimes result in the proceeds going back into the estate for tax because of benefits payable on terminal or critical illness.  If a primary aim of the policy is to fund an inheritance tax liability and/or to ensure the entire proceeds are available to the family/unmarried partner after death, a trust which excludes the policyholder from accessing the illness benefits is more suitable.   
 

Where beneficiary nomination excels 

Beneficiary nomination delivers speed and certainty by paying beneficiaries directly under the contract. It delivers comparable outcomes to flexible split trusts in many straightforward scenarios, but with greater ease for updating, and sees higher adoption because it is embedded in the application journey.  
 

Addressing common objections 

Nomination offers a different kind of control: speed and simplicity of change without involving others. For many term‑life cases, this frictionless execution is the most valuable form of control. 
 

“Nomination lacks control.” 

Nomination gives more control than trusts when it comes to ability to simply update nominations without involving anyone else.  This is suitable for singleownlife term cases where the need is simple: “pay my partner” or “split between the kids.” For these, speed and certainty often outweigh complexity. In these situations, frictionless execution often is the most valuable control because it happens.  

What's more, because beneficiary nomination can be superseded by a suitable trust, the door remains open to the more sophisticated control that might be needed as the family and its wealth evolves.  
 

“Proceeds go directly to nominees, unprotected if they’re minors or incapacitated.” 

If a beneficiary is still under 18 at claim, proceeds do not go directly to them but can be paid to a parent or guardian to hold on their behalf. Again, the door remains open to replacement with a trust if a beneficiary becomes incapacitated or if it appears the parent or guardian could no longer be trusted to manage the proceeds on the beneficiary’s behalf. 
 

“Terminal illness proceeds might go to the nominee.” 

In UK implementations, terminal illness benefits are paid to the life assured, not the nominee—so they have financial options while alive. This is exactly as expected by most policyholders, as reflected in the same outcome with most split trusts.  

Also as expected by policyholders and their partners, should they not survive long enough to receive the proceeds, the payout from the policy after death will generally be payable to the nominated beneficiaries.  
 

“Nomination is less available; trusts are universal.” 

Availability is widening: Several UK providers offer nomination across advised channels with Scottish Widows being the latest to include this in our proposition.  
 

Trusts still matter—here’s when they are needed 

None of this diminishes the power of trusts. 

Trusts remain essential where clients need control after death, protection for vulnerable beneficiaries, intergenerational planning or gifting of terminal illness benefits.  

Beneficiary nomination is fixed at claim and relies on regular review. There is no discretion after death which a trust can offer to the trustees. E.g. If a policy holder nominates their spouse, they divorce but forget to amend the nomination, the claim must absolutely be paid to the spouse. 

By contrast, if this was not under beneficiary nomination and in the estate, then the ex-spouse wouldn’t be entitled to benefit.  Or if it was under trust and the ex-wife is not the sole surviving trustee, then the trustees would have discretion to pay to someone other than the named default beneficiary.   
 

A practical framework for advisers 

Consider beneficiary nomination as the mechanism for straightforward cases where the objective is to get the money to the right person quickly and outside probate. Make use of trusts where greater control, protection or complexity is required, and review regularly as circumstances change. 

Beneficiary nomination isn’t “dumbing down.” It’s a practical tool that helps close the gap between advice and action.  It is a complementary tool that improves outcomes, reduces avoidable delays, and aligns with the Consumer Duty’s requirement to enable customers’ objectives. Use it for simple cases and keep trusts for when deeper control is required; help to close the beneficiary gap.  

Source:

¹Swiss Re and Insuring Change, Life claims: what matters most? November 2025