Pensions

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Death after draw down FAQs

Note: This FAQ is applicable only to members of the 2008 pension section/2015 Career Average Revalued Earnings (CARE) scheme.

 

What benefits are payable to my dependants if I die after I have taken a pension draw down from the 2008 section/2015 Career Average Revalued Earnings (CARE) scheme whilst continuing in NHS pensionable service?
How is the lump sum calculated?
I commuted pension in favour of extra lump sum. If I die within five years of retirement how is the lump sum calculated?
Who can the lump sum be paid to?
Is the lump sum taxable?
How much pension is payable to my qualifying partner following my death during pension draw down?
Following the ‘short-term pension’ what is payable to my qualifying partner?
Will my children receive benefits if I die during pension draw down?
How much will my qualifying child or children receive?
When does the child allowance become payable?
Is the child allowance payable for life?
My child will not be able to live independently. Can the child allowance be paid for life?
What happens to any additional pension or AVC I am purchasing if I die before retirement?
Is there any way that I can provide more benefits to my dependants, through the NHS pension scheme, other than those detailed above? 

What benefits are payable to my dependants if I die after I have taken a pension draw down from the 2008 section/2015 CARE scheme whilst continuing in NHS pensionable service?

If you die before you fully retire your dependants will be entitled to a lump sum. This would either relate solely to the portion of your benefits yet to be drawn down or, if you die within five years of last drawing down a pension, may include a balancing payment of five years worth of pension (less that already paid).

A qualifying partner and/or eligible children’s pension will also be payable.

 

How is the lump sum calculated?

If you die before you fully retire from NHS employment your dependants will receive a lump sum.

If you die within five years of last drawing down pension benefits, the lump sum will be comprised of two elements:

  • In respect of the benefits yet to be drawn down from the scheme, a lump sum of twice your actual pensionable pay would be due.  If, for example 40% of your pension had been drawn down then the death in service benefits in respect of the pension yet to be drawn down would be based on 60% of twice your actual pensionable pay. Please refer to the scheme specific calculation of pay in the 'Death in Service' FAQ.
  • In respect of the benefits drawn down within the last five years, a balancing lump sum payment (also known as the death deficiency payment) of five years of your pension, less what you have already received, will also be payable to your dependants. This death deficiency payment will be the lesser of:
     - five times the annual rate of your pension, less the amount of pension already paid to you; or
     - for 2008 section secondary care doctors: twice actual pensionable annual pay used in the calculation of the most recent draw down adjusted by the proportion of drawn down benefits to the total value of all your scheme benefits (less any lump sum taken by commutation or otherwise)
     - for 2008 section primary care doctors: twice average annual dynamised/pensionable earnings used in the calculation of the most recent draw down, adjusted by the proportion of drawn down benefits to the total value of all your scheme benefits (less any lump sum taken by commutation or otherwise).  
  • For 2015 scheme members twice the best revalued pensionable earnings in the last 10 years, adjusted by the proportion of drawn down benefits to the total value of all your scheme benefits (less any lump sum taken by commutation).

If you were to die more than five years after last drawing down benefits the lump sum would be comprised of one element only:

  • In respect of the benefits yet to be drawn down from the scheme, a lump sum of twice your actual pensionable pay would be due. If, for example 40% of your pension had been drawn down then the death in service benefits in respect of the pension yet to be drawn down would be based on 60% of twice your actual pensionable pay. 

 

I commuted pension in favour of extra lump sum. If I die within five years of retirement how is the lump sum calculated?

The pensions agencies will look at your pension actually in payment at the date of your death.

 

Who can the lump sum be paid to?

The lump sum is paid directly to your qualifying partner or elected person(s). 

If you are not married, or in a civil partnership, the payment made to an unmarried partner or other elected person may be subject to Inheritance Tax.   

If you are not married/in a registered partnership and you have not nominated a qualifying partner to receive the payment you can elect multiple persons including children or one organisation (including a bank, trustee or firm of solicitors) to receive this payment. The payment will then be paid to the nominees automatically without waiting for Grant of Probate or Letters of Administration.

If you do not want the payment to go to your spouse or civil partner you can nominate another person to receive the payment. A form, available from the pensions agencies at the following links, will need to be completed:

 

Is the lump sum taxable?

The lump sum is not subject to income tax.

Most lump sums will be below the Lifetime Allowance but those that are in excess of the Lifetime Allowance are liable for a Lifetime Allowance charge at 55% on the excess fund. It is for your personal representative to inform HMRC of the amount of lump sum paid and to arrange for any Lifetime Allowance charge to be paid to HMRC. Your beneficiary is responsible for paying any Lifetime Allowance charge that may be due.

Please refer to the Lifetime Allowance FAQ for more information on the charges payable.

 

How much pension is payable to my qualifying partner following my death during pension draw down?

A short-term pension is payable. This will comprise of two elements:

  • In relation to the drawn down pension, your qualifying partner will continue to receive the same level of pension as you were receiving after taking account of abatement, commutation or any mandatory lump sum.  This is payable for three months unless there are dependant children when it is then payable for six months.      
  • In relation to your continued pensionable NHS service your qualifying partner will receive a payment equal to your actual reckonable rate of pay (for secondary care hospital doctors) or your average pensionable earnings during the last complete quarter (for primary care doctors). This is payable for six months irrespective of whether you have dependant children or not.

 

Following the ‘short-term pension’ what is payable to my qualifying partner?

Following the short-term pension a pension (payable for life) is due. This will comprise of two elements:

  • In relation to the drawn down pension your qualifying partner will receive 37.5% of the pre-commutation pension (2008 section members) or 33.75% of the pre-commutation pension (2015 CARE scheme members).    
  • In relation to your continued pensionable NHS service the pension payable will be based on 37.5% (2008 section) or 33.75% (2015 CARE scheme) of the tier 2 (upper tier) ill health pension that you would have received had you retired on health grounds as at the date of death. For 2008 section members a tier 2 (upper tier) pension is usually enhanced by 2/3 of your prospective service until your normal retirement age (age 65) and means that the pension will be based on an enhanced amount. For 2015 CARE scheme members a tier 2 (upper tier) pension is usually enhanced by 1/2 of your prospective service until your State Pension Age and means that the pension will be based on an enhanced amount. 

 

Will my children receive benefits if I die during pension draw down?

If your child or children qualify as dependant children at the time of your death, then a child allowance is payable to each qualifying child.

In order to qualify they will need to be financially dependent on you and be:

  • under age 23 or,
  • over age 23 but unable to earn a living due to a permanent physical or mental condition present at the time of your death.

A child can include your biological child, an adopted child, a step child, a child of your qualifying partner, a grandchild, any dependent child, and a nephew or niece.

 

How much will my qualifying child or children receive?

The level of pension payable to a dependant child is comprised of two elements, which relate to:

The drawn down pension

The amount payable to your qualifying children will depend on:

  • Whether a qualifying partner pension is also payable. The 2008 section provides that if a payment is also being made to a widow/widower/registered partner/nominated partner then each child is entitled to 18.75% of the pre-commutation pension in payment. A maximum of 37.5% of the pension is payable to two or more children.
  • Where no payment is being made to a widow/widower/registered partner/nominated partner then each child is entitled to 24.99% of the pre-commutation pension in payment. A maximum of 49.98% the pension is payable to two or more children.
  • The 2015 section provides that if a payment is also being made to a widow/widower/registered partner/nominated partner then each child is entitled to 16.875% of the pre-commutation pension in payment. A maximum of 33.75% of the pension is payable to two or more children.
  • Where no payment is being made to a widow/widower/registered partner/nominated partner then each child is entitled to 22.49% of the pre-commutation pension in payment. A maximum of 44.98% of the pension is payable to two or more children.

Continued NHS pensionable service

The amount payable to your qualifying children will depend on:

  • Whether a qualifying partner pension is also payable. The 2008 section provides that if a payment is also being made to a widow/widower/registered partner/nominated partner then each child is entitled to 18.75% of the pre-commutation Tier 2 pension payable had you retired on health grounds as at the date of death. A maximum of 37.5% of the Tier 2 pension is payable to two or more children.
  • Where no payment is being made to a widow/widower/registered partner/nominated partner then each child is entitled to 24.99% of the pre-commutation Tier 2 pension payable had you retired on health grounds as at the date of death. A maximum of 49.98% the Tier 2 pension is payable to two or more children.
  • The 2015 section provides that if a payment is also being made to a widow/widower/registered partner/nominated partner then each child is entitled to 16.875% of the pre-commutation Tier 2 pension payable had you retired on health grounds as at the date of death. A maximum of 33.75% of the Tier 2 pension is payable to two or more children.
  • Where no payment is being made to a widow/widower/registered partner/nominated partner then each child is entitled to 22.49% of the pre-commutation Tier 2 pension payable had you retired on health grounds as at the date of death. A maximum of 44.98% of the Tier 2 pension is payable to two or more children.

If your service prior to retirement was less than 10 years, the child allowance will be based on 10 years service.

When does the child allowance become payable?

If your child is in the care of a qualifying partner who is in receipt of a short-term pension, the child allowance will start from the day after the short-term pension ends. This is six months after the date of death.

If a qualifying partner pension is payable but your child is not in that person’s care then your child will receive a short-term pension payable for three months,  followed by the child allowance thereafter. 

Where no qualifying partner pension is payable the short-term pension is paid to your child for six months. Thereafter, the child allowance becomes payable.

Please refer to the earlier question covering the calculation of qualifying partner pensions for information on the calculation of short-term pensions.    

 

Is the child allowance payable for life?

Child allowance payments are payable until your child reaches age 23.

 

My child will not be able to live independently. Can the child allowance be paid for life?

If your child, as result of mental or physical impairment present at the time of your death, is unable to support themselves the child allowance can be paid for life. You should contact the pensions agency at the time of your retirement providing them with a medical certificate or evidence of your child’s condition. This will be sent to the scheme’s medical advisers for approval. The condition will need to be present at the time of your death for the child allowance to be paid beyond age 23.

 

What happens to any additional pension or AVC I am purchasing if I die before retirement?

If you die before your normal retirement age of 65 (2008 section) or before your State Pension Age (2015 CARE scheme) and have had a contract to purchase additional pension which has been in place for a year or more and which has not been taken via the draw down arrangement, then the full contract is paid up.  More information can be found in our Additional Pension FAQ.

If you have an AVC this will pay out the full accumulated fund. 

 

Is there any way that I can provide more benefits to my dependants, through the NHS pension scheme, other than those detailed above?

You are able to allocate a maximum of one-third of your pension to a dependant which will be payable in addition to the benefits outlined above. An election to allocate part of your pension can be made within one month of retirement. More information can be found in our Allocation FAQ.