Death after retirement and your pension

Guidance on pensions and lump sums payable at death after retirement from the NHS, including sums payable to your children, spouse or partner.

Location: UK
Audience: All doctors
Updated: Monday 8 November 2021
Piggybank illustration

Depending on how long your pension has been in payment it may be possible for a lump sum to become payable on your death after retirement.

However, irrespective of how long your pension has been in payment a qualifying partner pension and/or eligible child allowance will also be payable.

A qualifying partner can be your spouse, registered civil partner or a nominated partner. You must be free to marry or enter a registered civil partnership for your nomination to be valid.

 

Lump sum payable after death

How much lump sum is payable to my dependents?

If you die within five years of retirement a balancing lump sum payment (also known as the death deficiency payment) of five years of your pension, less the pension that you have already received, will be payable to your dependents.  

If you are a member of the 1995 section

The lump sum will be:

  • five times the annual rate of your pension, minus the amount of pension already paid to you; and
  • for secondary care doctors, twice actual or pensionable annual pay at retirement (minus any lump sum taken by commutation or otherwise)
  • for GPs, twice average annual dynamised earnings at retirement (minus any lump sum taken by commutation or otherwise). 

If you are a member of the 2008 section

The lump sum will be the lesser of:

  • five times the annual rate of your pension, minus the amount of pension already paid to you; and
  • for secondary care doctors, twice actual/reckonable annual pay at retirement (minus any lump sum taken by commutation or otherwise)
  • for GPs, twice average annual dynamised earnings at retirement (minus any lump sum taken by commutation or otherwise). 

If you are a member of the 2015 scheme

The lump sum will be the lesser of:

  • five times the annual rate of your pension, minus the amount of pension already paid to you; and
  • twice the lump sum which would have been payable had you died an active member of the scheme (less any retirement lump sum taken by commutation).
I commuted pension for extra lump sum

If you commuted pension for extra lump sum and die within five years of retirement, when undertaking the calculation detailed above, the pensions agencies will look at your pension before any commutation to arrive at the starting point of five times your pension. 

However, when calculating twice your pay minus the retirement lump sum, it is the lump sum actually received that is considered.

My pension has been reduced to a tier 1 pension

You may have retired on health grounds and initially received a tier 2 (upper tier) pension.  Your pension may then have been substituted to a tier 1 (lower tier) pension as a result of earning in excess of the lower earnings limit my pension. 

If you die in receipt of a substitute tier 1 (lower tier) pension but within the 12-month protected period (which starts from when your pay from non NHS employment first exceeded the lower earnings limit), then the death deficiency lump sum will be based on your original tier 2 (upper tier) pension.

If, however, you were to die outside of 12 months after first having exceeded the lower earnings limit, then the death deficiency payment will be based on your tier 1 (lower tier) pension.  See our ill health retirement guidance

I am in receipt of a drawn down pension

If you are an active member of the 2008 section or 2015 scheme in receipt of draw down benefits, and you die within five years of drawing down, the lump sum will be calculated as per the rules for:

  • death in service (in relation to your ongoing active pensionable service)
  • death after retirement (in relation to the drawn down benefits). 
Who can the lump sum be paid to if I die within five years of retirement?

The death deficiency payment is paid directly to your spouse or civil partner or nominated unmarried partner. If you do not want your spouse/civil/nominated partner to receive the lump sum you can elect an alternative.

If you are not married or in a civil partnership and have not nominated anyone to receive this payment it will be paid into your estate and will potentially be subject to inheritance tax.

The form to nominate your unmarried partner, another person(s) or institution to receive this benefit:

Tax

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

If the payment is made to your spouse or civil registered 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. 

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 an 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 survivor pension following death after retirement

A pension can be payable to your spouse, registered civil partner or a nominated partner. You must be free to marry or enter into a registered civil partnership as well as meet additional criteria for your nomination to be valid.

What short term pension is payable to an adult dependent?

For the first three months (six months if there are dependent children) a short-term pension is payable which will be at the same rate as your pension.

However, if your pension has been subject to any of the following, these will be ignored:

  • any actuarial reduction (as a result of retiring earlier than your normal pension age)
  • any reduction as a result of giving up pension in favour of lump sum (commutation) 
  • any reduction as a result of your pension being abated (following a return to NHS employment after ill health retirement).
What long term pension is payable to an adult dependent?

For members of the 1995, the benefits payable for life are:

  • widow’s pension: half of your (pre-commutation, pre- actuarial reduction, pre-abatement) pension
  • widower’s and registered civil partner’s pension:  as for the widow’s pension above if death occurred after 5 December 2005
  • widowers of female members who died before 5 December 2005 receive half your pension but based only on service after 6 April 1988 (unless the increased widower/registered civil partner/unmarried partner pension has been purchased)
  • qualifying unmarried partner’s continue to receive benefits based only on service after 6 April 1988.  

For members of the 2008 section, the benefits payable for life are:

  • 37.5% of the pre-commutation pension. 

For members of the 2015 scheme the benefits payable for life are:

  • 33.75% of the pre-commutation pension.
What if I am separated from my legal/registered partner and have a new partner?

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

You can nominate your partner to receive the death deficiency payment. If you do not make a nomination to this effect then any payment will be paid directly to your legal spouse/registered civil partner. Your new partner will not qualify for a dependent pension.

Childrens pension following death after retirement

If your child/children qualify as dependent 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 at the time of ceasing pensionable employment and at the time of death and be:

  • under age 23
  • 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 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.

Benefits will be paid until they are 23.

What payment will my child receive if I was in the 1995 section?

If you were a member of the 1995 section, the amount payable to your qualifying children will depend on whether a widow/widower/registered partner or nominated partner pension is also payable.

If a payment is also being made to a widow/widower/registered partner/nominated partner, each child is entitled to a quarter of the pension that is being paid to you at the date of death. This is the pre-commutation, pre-actuarial reduction, pre-abatement pension.  A maximum of one half of the pension is payable to two or more children.

Where no payment is being made to a widow/widower/registered partner/nominated partner, each child is entitled to a third of the pension that is being paid to you at the date of death. This is the pre-commutation, pre-actuarial reduction, pre-abatement pension.  A maximum of two thirds of the pension is payable to two or more children.

What payment will my child receive if I was in the 2008 section?

If you were a member of the 2008 section, the amount payable to your qualifying children will depend on whether a widow/widower/registered partner or nominated partner pension is also payable.

The 2008 section bases the child allowance on 75% of the pension that is being paid to you at the date of death.  It is then allocated as follows.

If a payment is also being made to a widow/widower/registered partner/nominated partner, each child is entitled to a quarter of the allowance. The allowance is 75% of the pre-commutation, pre-actuarial reduction, pre-abatement pension payable at the date of death.  A maximum of a half of the allowance (half of 75% of the pension) is payable to two or more children.

Where no payment is being made to a partner, each child is entitled to a third of the allowance. The allowance is 75% of the pre-commutation, pre-actuarial reduction, pre-abatement pension payable. A maximum of two thirds of the allowance (75% of the pension) is payable to two or more children.

What payment will my child receive if I was in the 2015 scheme?

If you were a member of the 2015 scheme, the amount payable to your qualifying children will depend on whether a widow/widower/registered partner or nominated partner pension is also payable.

The 2008 section bases the child allowance on 67.5% of the pension that is being paid to you at the date of death.  It is then allocated as follows.

If a payment is also being made to partner, each child is entitled to a quarter of the allowance. The allowance is 67.5% of the pre-commutation, pre-actuarial reduction, pre-abatement pension payable at the date of death. A maximum of a half of the allowance (half of 67.5% of the pension) is payable to two or more children.

Where no payment is being made to a partner, each child is entitled to a third of the allowance. The allowance is 67.5% of the pre-commutation, pre-actuarial reduction, pre-abatement pension payable. A maximum of two thirds of the allowance (67.5% of the pension) is payable to two or more children.

When will the child allowance be paid?

If your child is in the care of an adult who is in receipt of a short term pension, the child allowance will start from the day after the short term widow/widower/registered/nominated partner pension ends. This is six months after the date of death.

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

See the earlier question covering the calculation of adult dependent pension for more on the calculation of short term pensions.   

Where no adult dependent pension is payable, the short term pension is payable to your child for six months. Then, the child allowance becomes payable. The calculation of short term pensions is above.  

My child is unable to live independently

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. 

NHS Pensions 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?

You are able to allocate a maximum of third of your pension to a dependent 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.