PSI11.1.8 - Benefits on Death in Service: General - Final Remuneration

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

[PN11.1]

Because death in service is often unexpected it is unlikely that remuneration could be significantly adjusted to affect the level of benefits payable and, therefore, such benefits can be based on a less restrictive definition of final remuneration than that for retirement benefits (see PSI6.4.15). The main relaxation is that benefits can be based on the rate of salary being received. A scheme may adopt any of the following definitions whether or not the employee is a controlling director:

1. where basic salary only is involved, the annual rate of basic salary or wages being received immediately before death,
2. basic salary or wages as above, plus the average of fluctuating emoluments during the 3 years (or the whole period of the employment if less) up to the date of death, or
3. the total earnings (fixed plus fluctuating) paid during a selected period of 12 months prior to death. The selected period may end either at the date of death, or on some convenient date, such as 5 April or the end of the scheme year, falling not earlier than 36 months prior to the date of death.

An addition for cost of living, with the date of death substituted for NRD in the formula described in PSI6.4.33may be added to b. and c. in respect of earnings for years other than the 12 months prior to death.