Most NHS pension scheme members focus on the retirement fund that comes with their pension. But did you know that it also provides valuable benefits to spouses, civil partners, partners and dependent children on the death of an NHS pension scheme member? Most people don’t!
So how much is your next of kin entitled to? I’m afraid there isn’t a simple answer. It depends on how you practice medicine and what NHS pension scheme you are in.
But let’s not get ahead of ourselves!
First things first, who’s eligible?
For your next of kin to be eligible for your NHS Pension entitlement, certain criteria have to be met. You need to:
- Be married, in a registered civil partnership or with a qualifying partner.
- Be a member of the NHS Pension Scheme for a minimum of 2 years.
- Meet further criteria
- if you are not married or in a civil partnership, e.g. living together in an exclusive relationship as if they were husband and wife or civil partners, and fill in a nomination form for your qualifying partner.
You can nominate someone else to receive your death-in-service lump sum. For instance if you are unmarried and have no dependent children, but you MUST complete the nominations form. These can be found on the below websites:
For England and Wales: Nominations | NHSBSA
For Scotland: Nominations | SPPA
Failure to make this nomination could mean your payment could be paid to your estate and be subject to inheritance tax.
What benefits can be paid if you ARE eligible?
In essence the key benefits of the life cover provided by the NHS to active NHS Pension Scheme members are:
1. Payment of a lump sum – This is where it gets a bit more complicated! The income figure used in this calculation varies slightly between the 1995, 2008 and 2015 schemes, but essentially its 2 x your pensionable pay.
For the finer details and to check which income is used by your pension section please refer to the NHS Pensions – Survivors Guide. These benefits are income tax free.
2. Dependent’s pension – your widow, widower, civil partner or nominated partner will receive 50% of your accrued NHS pension in the 1995 scheme, 37.55% in the 2008 scheme and 33.75% in the 2015 scheme, for the rest of their life. This will kick in 6 months after death. Until that time they will continue to receive your full salary.
3. Children’s pension – paid until age 23. There are some exceptions to it ending at this age. For instance if they are aged 23 or over and incapable of earning a living due to permanent physical or mental infirmity from which he/she was suffering at the time the member died.
How much is paid out varies slightly depending on which pension section you are in. It’s limited to 2 children at any one time. If you have 3 children, child 3 will receive the pension when child 1 no longer qualifies.
Per child – it is equivalent to 25% of the member’s accrued Tier 2 Ill Health Retirement pension benefit at the time of death in the 1995 scheme, 18.75% each child in the 2008 section, and 16.875% in the 2015 section. Again full details can be found on the NHS Pension – Survivors Guide.
Not contributing to the pension scheme when you die, but you are employed by the NHS
You still qualify for a death-in-service lump sum payment, which is once again tax free. The death lump sum payable will be based on the annual pension you would have received had you retired on the date of death, and the pension scheme section you are a member of:
- 1995 section: A lump sum of 3x your annual pension is payable
- 2008 section: A lump sum of 2.25x your annual pension is payable
- 2015 scheme: a lump sum of 2.025x your annual pension is payable.
Rules to be aware of!
1. Losing benefits: If you have not completed a nomination at your time of death and your partner or the person you want to benefit after your death does not fall into the recognised categories they will not receive any benefits.
The nomination form CANNOT be completed on your behalf after your death so do not delay and follow the above links to address this now.
2. Inheritance tax: Normally inheritance tax is not payable on benefits if a member is married or in a civil partnership etc. and payment is made to the deceased members legal spouse or civil partner. It potentially IS liable to inheritance tax if the member is single or if it is paid to a nominee of another type.
3. In all circumstances, any lump sum must be paid within two years of the date that the scheme was first notified of the member’s death. After two years the lump sum will be subject to a tax charge of up to 45%.
4. If the payment of death-in-service benefits causes you to exceed the lifetime allowance then the excess will be subject to a tax charge. Your beneficiary is legally responsible for paying any LTA charge due
5. If you are a freelance GP Locum or bank staff and do not die while within your contractual hours you will not benefit from ‘in pensionable service’ benefits. Your dependents may benefit from the payments noted above for non scheme members.
For greater detail on this please see our article: GP Locums: Will you get death in service benefit?
6. If you are already in receipt of your NHS retirement pension and die there are no further lump sums payable to your estate.
The NHS pension scheme has a long tradition of taking care of dependents of their members when the worst happens, however, as you can see, it can be a complicated topic. But there are some simple truths:
- If in doubt, complete the nomination forms as soon as humanly possible. You can change them later if your situation alters, but if you die no one can respectively complete them for you.
- No amount of money will make up for the loss of a loved one, but receiving some form of pension benefit can reduce stress and allow you time and space to think.
If you feel your family will need more than these benefits consider topping them up with life protection or even Critical illness with terminal cover. Not all policies are the same so always take independent specialist advice before making any decisions.
As always, we are here to help. Please do not hesitate to get in touch.
If you have specific queries following the death of a loved one we also strongly suggest calling the NHSPS bereavement line on 0300 3301 346.
Have you made your pension nomination? Lets us know by leaving a comment below
Editor’s note: This post was originally published in June 2014 and has been completely revamped and updated for accuracy and comprehensiveness.