RPSM09103170 - Technical Pages: Member benefits: An alternatively secured pension: Death benefits

This guidance only covers members who became entitled to an alternatively secured 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 reached age 75 on or after 6 April 2011 then see the guidance at RPSM09103500.

Benefits that can be provided from any remaining alternatively secured pension fund on the death of the member (after age 75)

[s166][s167(1), ‘Pension death benefit rules 1, 5 and 6’][Para 12(2) and (3), and 15 to 27, Sch 28][Para 18 and 19, Sch 29]

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

• the continuing payments from the alternatively secured pension fund which had been guaranteed before 6 April 2007 and the member died before this date (see RPSM09103120)
• the allocation of funds to provide any dependant of the member who is under the age of 75 when the member died with a dependants’ unsecured pension (see RPSM10104440)
• the allocation of funds to provide any dependant of the member who is 75 or over when the member died with a dependants’ alternatively secured pension (see RPSM10104740)
• the purchase of a dependants’ annuity (see RPSM10104310) or provision of a dependants’ scheme pension (see RPSM10104110) and
• where there is no surviving dependant of the member the payment of either a charity lump sum death benefit or where the member died before 6 April 2007 a transfer lump sum death benefit (see RPSM10105310 and RPSM10105330 respectively).

A dependant may take a mixture of the above benefits in the first four bullet points above where the scheme rules allow this.

Where the member has more than one dependant

The remaining alternatively secured pension fund may be split between two or more dependants of a member. Each dependant may be provided with a different form of benefit from the other dependant(s), within the above restrictions. The level of choice open to either the member or the dependant is down to a scheme to decide.

For example, if a member has two dependants on death and leaves an alternatively secured pension fund of £200,000 then these funds may be split between those two dependants. Each may be allocated £100,000 (or a higher or lower amount) and, scheme rules providing, each dependant may be given a choice over how they take benefits from those funds. So one may use the funds to purchase a dependan’ts annuity, whereas the other may opt to take a dependants’ unsecured pension or, if 75 or over, a dependants’ alternatively secured pension.

Scheme winding-up

If the scheme is winding-up and a dependant’s pension entitlement is deemed trivial it may in certain circumstances be paid as a winding-up lump sum death benefit. See RPSM10105510 for more details.

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 RPSM04104020.

Also see RPSM04106000 in respect of inheritance tax and tax charges on unauthorised payments in relation to remaining alternatively secured pension funds on the death of a member or remaining dependant’ alternatively secured pension funds on the death of a dependant.