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Providing for your family

Death in Service Benefits for the NHS Pension Scheme

Do you know what your loved ones would be entitled to in the event of your death? The NHS Pension Scheme offers valuable benefits, but these are only a starting point.

Is your family well protected financially in these difficult times? Many members of the NHS Pension Scheme will know that it provides important support for their loved ones should they pass away, but it’s vital that you understand the detail of these death benefits. Once you know exactly what cover you have, you can decide whether you need to arrange further protection.

In practice, NHS Pension Scheme death benefits vary according to which section of the scheme you belong to. But in each case, there are several types of benefit to consider.

  1. If you’re an active member of the NHS Pension Scheme – an NHS worker currently paying into the scheme – in the event of your death, your family would receive a cash lump sum worth two times your annual pensionable pay, or your average uprated earnings for practitioners. Pensionable pay is defined slightly differently depending on which section you belong to, but members qualify for the lump sum benefit as soon as they join the NHS Pension Scheme.
  2. After two years of scheme membership, you also qualify for dependents’ benefits – a “Partner’s Pension”, payable to spouses and other qualifying partners. The latter must meet certain criteria, including having lived together for at least two years, being able to demonstrate financial interdependence and both being legally free to get married or to enter into a civil partnership.
  3. The NHS Pension Scheme also offers children’s pensions, payable to children including your biological children, step children, adopted children and grandchildren. Dependent children are defined as those under the age of 23, or children over the age of 23 who aren’t able to earn a living because of a physical or mental disability with which they were suffering at the time of the member’s death.

Importantly, if you have opted out of the NHS Pension Scheme, or you’re a deferred member, you’re not eligible for a death in service lump sum. Instead, members of the 1995 section will be paid a lump sum worth three times their pension, 2008 section members a lump sum worth 2.25% their pension and 2015 Scheme members a lump sum of 2.025% the pension they would have received had they retired on the date of death. In addition, dependents’ and children’s pensions based on your NHS Pension membership to date will also be paid. If you are an active member, or have been opted out of the NHS Pension scheme for less than 12 months your dependents and children will receive an increased pension based on the potential future service you would have completed had you survived to your Scheme retirement date (known as a tier 2 enhancement) as detailed below. If you are a deferred member no such enhancement is paid.

What dependants’ benefits are worth

The value of benefits available to your dependants will depend on which section of the NHS Pension Scheme you belong to.

In the 1995 Section, assuming you have at least two years’ membership, the dependent pension for adults is worth 50% of the tier 2 ill-health retirement pension you would have been entitled to at the time of your death. This is usually based only on your scheme membership from 6 April 1988, though widows of male members can count membership before that date and some members may have bought “additional survivor pension” cover.

This dependents’ pension typically becomes payable six months after your death, with all scheme members (including those with less than two years’ membership) initially qualifying for a short-term pension. This is worth the equivalent of your pensionable pay.

As for children’s pensions, 1995 Section members qualify for a payment worth 25% of their tier 2 ill-health retirement for their first child; for members with more than one child, this rises to 50%, split equally between the children. Note that higher rates may be available if no adult dependent’s pension is being paid.

In the 2008 Section, assuming two years’ membership, dependents also qualify for the short-term pension worth your pensionable pay for six months. After that, they get 37.5% of your tier 2 ill-health retirement pension entitlement. Children’s pensions are worth 18.75% of your ill-health pension, rising to 37.5% if you have two children or more.

In the 2015 Section, again assuming two years’ membership, dependents’ benefits differ according to your age. If you die before your normal pension age, the entitlement is 33.75% of your tier 2 ill-health pension entitlement. If you’re above the normal pension age, your dependents receive payments equivalent to your pensionable earnings for six months (reduced to three months if you have no dependent children). Children’s pensions are worth 16.875% of your ill-health pension, rising to 33.75% if you have two children or more.

In each case, the amount that active members’ dependants will receive will also be affected by the enhancements they qualify for. These reflect the reality that had you survived until retirement your pension benefits would have been more valuable.

In the 1995 and 2008 sections, you qualify for an enhancement based on your pension earned to date, plus the “tier 2 addition”, a pro-rata increase that is worth two-thirds of your respective membership up until your normal retirement age. In the 1995 Section, your total membership worked out this way cannot exceed your prospective membership at 60, or 65 in the 2008 Section.

In the 2015 Section, the pro-rata increase is based on half your prospective pension to normal pension age (the state retirement age).

Are you covered?

Bank staff and freelance GP locums should note that specific rules apply to their entitlements. For the purposes of eligibility for death benefits, they are regarded as being in pensionable service if they are at work and paying into the scheme. For example, if you’re contracted to work from nine until five, Monday to Wednesday, you’ll be eligible for death in pensionable service benefits during this time. This means that if you pass away on, say, a Thursday, you’re not eligible.

Bank staff and freelance GP locums available for work, because they’re on an employer’s list or bank, but not actually at work, aren’t eligible either. In these scenarios the death benefits payable are those payable to deferred members as detailed earlier in this article.

Covid-19 related deaths

In England Health and Social Care Secretary Matt Hancock has announced that families of staff who die from coronavirus in the course of their essential work will receive a payment of £60,000. This is in addition to any benefits paid from the NHS Pension scheme. The scheme is time limited for the period of the Pandemic. Welsh Health Minister Vaughan Gething, has announced the same will apply in Wales. Northern Ireland is anticipated to follow England and Wales, but has yet to be confirmed as at 10th June 2020. In Scotland Health Secretary Jeane Freeman has confirmed a total lump sum of 2 x annual pensionable earnings and continued survivor entitlements, will be provided in the event of death in service regardless of whether you are a member of the NHS Pension scheme or not.

More broadly, everyone needs to understand exactly what their death in service benefits would provide for their loved ones – and in what circumstances. Think hard about the position your family would be in. The NHS Pension Scheme provides relatively generous death benefits, but these may still leave your heirs well short of a comprehensive financial safety net.

Content correct at time of writing and is intended for general information only and should not be construed as advice.

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