Death after leaving the NHS pension scheme

This guidance is for doctors who have left NHS pensionable service with deferred pension benefits.

Location: UK
Audience: All doctors
Updated: Wednesday 1 November 2023
Piggybank illustration

What, who to and when your pension is paid is dependent on a number of factors including which NHS pension section you are and have been a member of.

If you leave pensionable NHS employment prior to normal pension age with fewer than 730 days of membership, two calendar years, then you will not have met the pension scheme preservation requirements and you will only qualify for a refund of pension contributions or transfer to another scheme.

If contributions have been refunded or accrual transferred to another scheme the benefits detailed below will not apply.

Contributions will be refunded if you have left the scheme over 12 months ago with less than two years’ service and then die.

Lump sum

If you die with a deferred pension, a lump sum death gratuity and a spouse/civil registered/nominated partner and/or child allowance may be payable.

How much lump sum is payable if I have a deferred pension?

2015 scheme

A lump sum of 2.025 times your deferred pension is payable.   

If you were contributing to the NHS pension scheme prior to 1 April 2015 then the appropriate lump sum relating to the deferred benefits accrued under the 1995/2008 sections will also be payable.

2008 section

A lump sum of 2.25 times your deferred pension is payable.

1995 section

A lump sum of three times your deferred pension is payable.

How is the lump sum taxed?

The lump sum death gratuity is not subject to income tax.

If the payment is made to your spouse or registered civil partner it is free of inheritance tax. If you are single and have nominated an unmarried qualifying partner the sum could potentially be liable for inheritance tax.

Where there is no spouse/registered civil/nominated partner and no nominated payee is named, the payment will be made into your estate where it will also be liable for inheritance tax. 

However, in all circumstances if the payment caused you to exceed the LTA (lifetime allowance) then the excess was subject to a tax charge.  From 6 April 2024 the LTA will be abolished and the LTA allowance will no longer be tested for. Instead a new threshold will be created called the Lump Sum and Death Benefit Allowance set at the current LTA rate of £1,073,100.  It is expected that all tax free pension lump sums will be included in this threshold. Unless this is exceeded most lump sums on death will not be taxable unless paid more than two years after the date of death when it will be taxed at the recipients marginal rate of tax.

Whenever a lump sum is payable, the relevant pensions agency will inform your legal representative of the amount and from 6 April 2024 will need to assess how much of the Lump Sum and Death Benefit allowance has been used.  Your legal representative is responsible for notifying this figure to the HMRC if there is any tax due at the recipients marginal rate of tax. .

Your beneficiary is legally responsible for paying any tax  that may be due.

The death lump sum must be claimed and paid within two years of your death otherwise it becomes an ‘unauthorised’ payment under HMRC rules and is subject to up to 45% tax.

Ongoing adult dependant pension following death in deferment

What if I die within 12 months of leaving the NHS with less than 2 years’ service?

There is no adult dependant pension payable, either short or long term, if your membership of the scheme totals less than two years.  Earlier membership in the 1995 and 2008 sections counts towards the two year total if the earlier service has not been transferred out.

Membership retained in another NHS pension scheme (e.g. in another nation) will not count towards this limit if you move nation and do not transfer your benefits.

What if I die within 12 months of leaving the NHS with more than 2 years’ service?

If you had more than two years membership, whilst no short-term pension is payable, an adult dependant will receive a pension payable from the date of your death. The pension will be based on an enhanced pension which would have been payable had you retired on health grounds on the day you left pensionable employment.

The method used to calculate benefits will be based on the 2015 scheme rules as all members moved to this scheme from 1 April 2022.

2015 scheme

Benefits will be based on 33.75% of the tier 2 (upper tier) ill health retirement pension that would have been payable had you retired on health grounds on the day you left pensionable employment.

A tier 2 pension is usually enhanced by half of your prospective service, until your state pension age, so the pension will be based on an enhanced amount. 

What if I die after 12 months of leaving the NHS with more than 2 years’ service?

Whilst no short-term pension is payable, your adult dependant will receive a pension from the date of your death. The pension will be based on your accrued benefits only with no enhancement.

The method used to calculate benefits depends on which section of the NHS pension scheme you were previously a member of.

2015 scheme

Benefits will be based on 33.75% of the preserved pension payable.

In the 2015 scheme qualifying partner benefits are based on all membership.

If you transitioned to the 2015 scheme from the 1995/2008 sections, the appropriate portion of those accrued benefits will also be payable.

2008 section

Benefits will be based on 37.5% of the preserved pension payable.

In the 2008 section qualifying partner benefits are based on all membership.

1995 section

Benefits will be based on one half of the deferred pension.

A widower or surviving registered civil partner (if your service continued beyond 1 April 2008) will receive the same proportion of benefits as detailed above if death occurred after 5 December 2005. If death occurred before this, benefits will be based on the same proportion but based only on service since 6 April 1988.

A qualifying nominated partner will continue to receive benefits based on service after 6 April 1988 only.

 

What if I am separated from my legal spouse and have  a new partner?

Your legal spouse will continue to qualify for the widow/widower/registered civil partner pension until you are legally divorced. However, all eligible children will qualify for the child allowance.

You can nominate your new partner to receive the lump sum payment. However, if you do not make a nomination then any payment will be paid directly to your legal spouse. Your partner will not qualify for an adult dependent pension.

Children dependant pension following death in deferment

A child allowance may be paid from the date of death to any child who was dependant on you both at the time of leaving the scheme and at the date of death.

If you had pensionable service in the NHS pension scheme after 1 April 2008, your child will need to be financially dependant on you and be:

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

If your NHS pensionable service ceased before 1 April 2008, your child will only be considered a dependant child if they are under the age of 17 or in full-time education at the time of death.

If a child is born one year or less after you leave pensionable employment the child will count as being a dependant child if they are dependant on you when you die. A child can include:

  • your biological child
  • an adopted child
  • a step child
  • a child of your civil or nominated qualifying partner
  • a grandchild
  • any dependant child
  • a nephew or niece.
What if I die within 12 months of leaving the NHS with less than 2 years’ service?

Whilst no adult dependant pension is payable, if you die within 12 months of leaving the NHS pension scheme, child benefits are payable on the same basis as for a deferred member who has more than two years’ service and dies within 12 months of leaving.

Benefits will be based on an enhanced pension and be calculated based on a minimum of 10 years’ service.

What if I die within 12 months of leaving NHS service with more than 2 years’ service?

A child allowance is payable to your qualifying children. The pension will be based on an enhanced pension which would have been payable had you retired on health grounds on the day you left pensionable employment.

The method used to calculate benefits will be based on the 2015 scheme rules as all members moved to this scheme from 1 April 2022.

2015 scheme

If a payment is also being made to an adult dependent, then each child is entitled to 16.875% of the pre-commutation tier 2 (upper tier) pension payable had you retired on health grounds on the day you left pensionable employment.

A maximum of 33.75% of the tier 2 pension is payable to two or more children.

Where no payment is being made to an adult dependent then each child is entitled to 22.49% of the tier 2 pension payable. A maximum of 44.98% of the tier 2 (upper tier) pension is payable for two or more children.

Benefits will be calculated based on a minimum of 10 years’ service.

What if I die after 12 months of leaving NHS service with more than 2 years’ service?

A child allowance is payable to your qualifying children. The pension will be based on your accrued benefits only with no enhancement.

The method used to calculate benefits depends on which section of the NHS pension scheme you were previously a member of.

1995 section

If a payment is also being made to an adult dependant then each child is entitled to a quarter of the deferred pension you had accrued when you ceased membership. A maximum of half of the deferred pension is payable to two or more children.

Where no payment is being made to an adult dependant then each child is entitled to one third of the deferred pension you had accrued when you ceased membership.

A maximum of two thirds of the accrued pension is payable to two or more children.

Benefits will be calculated based on a minimum of 10 years’ service.

2008 section

If a payment is also being made to an adult dependant then each child is entitled to 18.75% of the deferred pension you had accrued when you ceased membership. A maximum of 37.5% of the deferred pension is payable to two or more children.

Where no payment is being made to an adult dependant then each child is entitled to 24.99% of the deferred pension you had accrued when you ceased membership. A maximum of 49.98% of the accrued pension is payable to two or more children.

Benefits will be calculated based on a minimum of 10 years’ service.

2015 scheme

If a payment is also being made to an adult dependant then each child is entitled to 16.875% of the deferred pension you had accrued when you ceased membership.

A maximum of 33.75% of the deferred pension is payable to two or more children.

Where no payment is being made to an adult dependant, each child is entitled to 22.49% of the deferred pension you had accrued when you ceased membership.

A maximum of 44.98% of the accrued pension is payable to two or more children.

Benefits will be calculated based on a minimum of 10 years’ service.

When will the child allowance be paid?

As no short term pension is payable the child allowance will start immediately.

What if my child is unable to live independently?

If your child, as a result of a mental or physical impairment present at the time of your death, is unable to support themselves, the child allowance can be paid for life.

The NHS pension administrator will need to be provided with a medical certificate or evidence of your child's condition. This will be sent to the scheme’s medical advisers for approval.

How can I provide more benefits to my dependants?

You may be able to allocate pay of your pension to provide additional benefits for a dependant but as a deferred member you are unable to increase your benefits within the scheme but may wish to consult with an independent financial adviser on the best way to provide additionally for dependants.

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