There are three separate classes of beneficiary that can receive pension income from the deceased member’s fund:
- Dependant.
- Nominee.
- Successor.
The definition of a dependant covers the following:
- Spouse or civil partner: If the deceased was married or in a civil partnership at their date of death, their spouse or civil partner is a dependant.
- Children: Children of the deceased will be dependants until they reach age 23 – or over 23 if in the opinion of the scheme administrator they were, at the date of the member’s death, dependent on the member because of physical or mental impairment.
And finally, anyone else who, in the opinion of the scheme administrator, at the date of the member’s death:
- was financially dependent on the member; or
- their financial relationship with the member was one of mutual dependence; or
- was dependent on the member because of physical or mental impairment.
The final category could cover long-term, cohabiting, unmarried partners who are likely to have been sharing their financial responsibilities during that time.
A nominee is any individual the deceased may have named as beneficiaries in their lifetime.
In this case, those named beneficiaries would be eligible to receive the pension death benefits.
As an example, a grown-up child would no longer classify as a dependant, so if the member wanted them to have the option of receiving a pension rather than just a lump sum they would need the nominate them.
To be a successor that individual must have been nominated by a dependant, nominee or another successor of the member to receive benefits following their death.
There is no limit on the number of successors, so in theory the pension fund could be passed on for generations if it is not all taken out.
It is worth noting that the specific rules and eligibility criteria for pension death benefits can vary depending on the pension scheme, and it is important to check with the scheme provider for detailed information.
If a beneficiary does not fall into one of these classes, they will not be able to receive death benefits as a pension and would only have the less flexible option of a lump sum.
Charity lump sum death benefits
If the member dies leaving no dependants, a charity lump sum death benefit can be paid.
The payment is not subject to tax and is not tested against the LTA, but a charity lump sum death benefit can only be paid following the death of a member where:
- there are no dependants of the member; and
- the member has nominated the charity as a beneficiary.
Both of these conditions must apply.
If the member leaves no dependants, but has not nominated a charity, a charity lump sum death benefit cannot be paid.
Similarly, if the member has nominated a charity but there is a dependant, the charity lump sum death benefit cannot be paid.
On the death of a dependant, nominee or successor, a charity lump sum death benefit can only be paid where:
- there are no dependants of the member at the time of payment; and
- the deceased member or the deceased beneficiary has nominated a charity for the funds to be paid to.
It is not relevant whether the deceased beneficiary had any dependants, and it is important to note that charities can always be nominated as beneficiaries by the member.
