RPSM09102140 - Technical Pages: Member benefits: An unsecured pension: Overview: Death benefits

This guidance only covers members who became entitled to an unsecured pension before 6 April 2011. If the member reached age 75 between 22 June 2010 and 5 April 2011 you should also read the guidance in RPSM17100000 onwards.

If the member became entitled to their pension on or after 6 April 2011 then see the guidance at RPSM09103500.

Benefits that can be provided from any remaining unsecured pension fund on the death of the member before age 75

[s167, ‘Pension death benefit rules 1, 3 and 4’][s168][Para 15 to 27, Sch 28][Para 15, 17 and 20, Sch 29] 

The only benefits a money purchase arrangement is authorised to provide from any unsecured pension fund left on the death of the member are as follows

• the allocation of funds to provide any dependant of the member aged under 75 when the member died with a dependants’ unsecured pension (see RPSM10104400),
• the allocation of funds to provide any dependant of the member aged 75 or over when the member died with a dependants’ alternatively secured pension (see RPSM10104700),
• the purchase of a dependants’ annuity (see RPSM10104300) or provision of a dependants’ scheme pension (see RPSM10104100), and
• the payment of an unsecured pension fund lump sum death benefit (see RPSM10105230).

If there are any uncrystallised funds also remaining in the arrangement

Any uncrystallised funds held when the member died may be used to give the same pension benefits as described above. But instead of an unsecured pension fund lump sum death benefit being payable, an uncrystallised funds lump sum death benefit may be paid. This lump sum can be paid tax-free, if the member had enough available lifetime allowance on his death to cover the payment.

Mixed benefits and the position where there is more than one ‘dependant’

A dependant may take a mixture of the above benefits from any funds allocated for their benefit. If there are also uncrystallised funds the benefits provided from the unsecured pension fund may be different to those provided from the uncrystallised funds.

If there is more than one dependant then the remaining unsecured pension fund and/or uncrystallised funds may be split between all the dependants. Each dependant can be provided with a different form of benefit than the other dependant(s), within the above restrictions. For example, an unsecured pension fund of £200,000 may be allocated to 2 dependants - £100,000 each. Each dependant can choose how they take benefits. One may take the lump sum route, and the other may opt to take a dependants’ unsecured pension.

The scheme will decide the level of choice available to the member or dependants.

Trivial pension benefits

If a dependant’s pension entitlement is deemed to be trivial it may be paid as a trivial commutation lump sum death benefit or a winding-up lump sum death benefit. RPSM10105260 and RPSM10105510 describe the circumstances in which this may happen.

Other payments

Any other benefit provided on the death of the member is an unauthorised member payment and the recipient will be taxed accordingly - see RPSM04104000.