RPSM09101330 - Technical Pages: Member benefits: A secured pension: Scheme pension: Overview: Death benefits from a scheme pension

This guidance only covers the position where the member died before 6 April 2011. If the member died on or after 6 April 2011 please also see RPSM10104000 and RPSM10106000.

Benefits that may be paid where a member in receipt of a scheme pension dies

The only benefits a registered pension scheme is authorised to provide on the death of a (pensioner) member in receipt of a scheme pension entitlement are as follows

• if the scheme pension is being paid from a defined benefits arrangement the provision of a dependants’ scheme pension to any dependants of the member,
• if the scheme pension is being paid from a money purchase arrangement the provision of a dependants’ scheme pension, dependants’ annuity, dependants’ unsecured pension or dependants’ alternatively secured pension to any dependants of the member,
• the continuation of any member’s scheme pension for the term of any term-certain period of guarantee that remains (see RPSM09101280),
• if the scheme pension is being paid from a defined benefits arrangement, the payment of a defined benefits lump sum death benefit or a pension protection lump sum death benefit where the member dies before their 75^t h birthday (but not if after) (see RPSM10105110 and RPSM09101290), and
• if the scheme pension is being paid from a money purchase arrangement, the payment of an annuity protection lump sum death benefit where the member dies before their 75^t h birthday (but not if after) (see RPSM10104050).

Mixed benefits and more than one dependant

A dependant may be provided with more than one of the above forms of benefits under a defined benefits arrangement.

Where there is more than one dependant each dependant may be given a benefit under the arrangement. Similarly a lump sum benefit may be paid to an individual who is not a dependant even though a dependant exists, and whether or not they too are receiving a benefit from the scheme.

The level of choice open to either the member or the dependant is down to the scheme to decide.

Trivial benefits

If a dependant’s pension entitlement is trivial it may in certain circumstances be paid as a trivial commutation lump sum death benefit or a winding-up lump sum death benefit. See RPSM10105260 and RPSM10105510 for further details.

Where liability is secured with an insurance company

Where the scheme pension entitlement is secured with an insurance company the rules are exactly the same. The contract should not provide for any other benefits in the event of the member’s death.

Other payments

Any death benefit provided by a registered pension scheme (or a contract or policy purchased by such a scheme) that is not listed above will not be an authorised member payment and will be taxed as an unauthorised member payment (chargeable on the recipient). A scheme sanction charge may also apply. See RPSM04104020 and RPSM04104040 for details on the taxation of unauthorised payments.

Whether or not a scheme provides such benefits depends on the scheme rules or provisions (and what is written into any contract, where an insurance company is involved).