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: Thursday 11 November 2021
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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 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 transitioned to the 2015 scheme from the 1995/2008 sections. 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 causes you to exceed the LTA (lifetime allowance) then the excess will be subject to a tax charge. 

Whenever a lump sum is payable, the relevant pensions agency will inform your legal representative of the amount and percentage of the standard LTA represented by the payment. Your legal representative is responsible for notifying this figure to the HMRC if there has been a LTA charge.

Your beneficiary is legally responsible for paying any LTA charge 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 dependent 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 dependent pension payable, either short or long term, if your membership of the scheme totals less than two years.

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 dependent will receive a pension 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 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 tier 2 (upper tier) ill health retirement pension that you would have received 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.  

2008 section

Benefits will be based on 37.5% of the tier 2 (upper tier) ill health retirement pension that you would have received had you retired on health grounds on the day you left pensionable employment. A tier 2 pension is usually enhanced by two thirds of your prospective service, until you are 65, so the pension will be based on an enhanced amount.

In the 2008 section all adult dependent benefits are based on all membership. There is no restriction in relation to service accrued before 6 April 1988.

1995 section

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

A tier 2 pension is usually enhanced by 2/3 of your prospective service, until you are 60, so the pension will be based on an enhanced amount.

A widower or surviving registered civil partner (if your service continued beyond 1 April 2008 and a nomination was made) will receive the same proportion of benefits if death occurred after 5 December 2005 (if before they will receive 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 die after 12 months of leaving the NHS with more than 2 years’ service?

Whilst no short-term pension is payable, your adult dependent 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.

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 and a nomination was made) 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 dependent pension following death in deferment

A child allowance may be paid from the date of death to any child who was dependent 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 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 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 dependent 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 dependent child if they are dependent 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 dependent 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 dependent 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 depends on which section of the NHS pension scheme you were previously a member of.

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.

2008 section

If a payment is also being made to an adult dependent, then each child is entitled to 18.75% of the pre-commutation tier 2 pension payable had you retired on health grounds on the day you left pensionable employment.

A maximum of 37.5% 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 24.99% of the tier 2 pension payable. A maximum of 49.98% of the tier 2 pension is payable to two or more children.

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

1995 section

If a payment is also being made to an adult dependent then each child is entitled to a quarter of the tier 2 (upper tier) pension that would have been payable had you retired on health grounds on the day you left pensionable employment.

Where no payment is being made to an adult dependent, each child is entitled to a third of the tier 2 pension that would have been payable had you retired on health grounds on the day you left pensionable employment. A maximum of two thirds of the pension is payable to 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 dependent 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 dependent 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 dependent 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 dependent 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 dependent 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 dependent, 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 dependents?

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 dependents.

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