Death Benefit Nomination
When you die, the Trustees of the Scheme will consider any person on your death benefit nomination form to decide who is to receive your death benefit, so it is important that you keep this form up to date to make your intentions clear, even after you have retired. The Trustees are not legally obliged to act in accordance with your nomination, so that any death benefit paid to your beneficiaries may be excluded under HM Revenue & Customs Inheritance Tax rules.
Death Benefit before Retirement
In the event of your death before you start taking your benefits, if your spouse or civil partner survives you they are entitled to receive 50% of the pension you were entitled to at the date of death.
An income of 25% of your pension is payable to each dependent child to a maximum of 50% for two or more children.
The pension payable is a proportion of whichever pension you qualify for and is higher; so if you qualify for the Final Salary Pension and this is higher, your dependant's pension is a proportion of the Final Salary Pension.
Otherwise it is a proportion of the Money Purchase Pension.
A dependent child is considered to be any child under the age of 18, as well as any child in full time education and under the age of 21. A dependent child’s pension will cease on their 18th or 21st birthday as relevant.
Death Benefit after Retirement
Once your pension is in payment, it continues to be paid for the rest of your life.
If your spouse or civil partner survives you, they are entitled to receive 50% of the income you were entitled to at the date you retired - regardless of any pension commencement lump sum you took - increased by the same rate of annual pension increases that has been applied to your income since you retired.
(Note that if you took a tax-free cash lump sum at retirement in exchange for a reduction in your monthly income, your spouse’s starting pension could actually work out as more than 50% of the pension income you were receiving at your death).
If you die within five years after retiring, your beneficiaries will also receive the balance of the first five years of income that would have been paid to you, paid as a lump sum benefit. This is known as the five year guarantee.