PTM071100 - Death benefits: essential principles: authorised benefits following the death of a member
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Glossary |
The types of authorised benefits a registered pension scheme can make as authorised payments following the death of a member depends on:
- the type of pension arrangement providing the benefit and
- whether or not the member put benefits into payment, and
- where benefits were put into payment, the type of pension that was provided to the member.
A member may have had a mixture of benefits that were put into payment and uncrystallised rights under a pension scheme when they died.聽 They may also be receiving different types of pension from the pension scheme.
Rights are uncrystallised if, before the member died, they weren't entitled to payment of benefits in respect of those rights.聽
PTM071000 provides guidance on the types of arrangement providing death benefits.
Money purchase death benefits that may be provided from uncrystallised funds
Death benefits payable under a lifetime annuity contract
Money purchase benefits following the death of a member receiving scheme pension
Benefits payable following the death of a member receiving drawdown pension
Benefits payable following a member鈥檚 death under a defined benefits arrangement
Money purchase death benefits that may be provided from uncrystallised funds
Sections 165, 167 and 168, Part2 Schedule 28 and Part 2 Schedule 29 Finance Act 2004
Funds that are uncrystallised at the member鈥檚 death under a money purchase arrangement may be used to provide any one or more of the following types of pension:
- a 诲别辫别苍诲补苍迟蝉鈥� annuity 鈥� see PTM072200,
- a 苍辞尘颈苍别别蝉鈥� annuity - see PTM072200,
- a 诲别辫别苍诲补苍迟蝉鈥� drawdown pension 鈥� see PTM072400,
- a 苍辞尘颈苍别别蝉鈥� drawdown pension 鈥� see PTM072400, or
- a 诲别辫别苍诲补苍迟蝉鈥� scheme pension 鈥� see PTM072100.
If a dependant鈥檚 pension entitlement is small in certain circumstances it may be paid as a trivial commutation lump sum death benefit 鈥� see PTM073700.聽 A 苍辞尘颈苍别别蝉鈥� pension cannot be commuted into a trivial commutation lump sum death benefit.
Uncrystallised funds under a money purchase arrangement may also be used to pay:
- an uncrystallised funds lump sum death benefit 鈥� see PTM073200, or
- a charity lump sum death benefit 鈥� see PTM073900.
Death benefits payable under a lifetime annuity contract
When a member purchases a lifetime annuity contract, they have the option of choosing one that provides benefits following their death.聽 This may be as:
- a joint-life contract where the contract provides for a further annuity to be paid to a dependant or nominee following the member鈥檚 death, or/and
- a guarantee to make payments for a minimum period or of a certain amount.
Where the member was receiving lifetime annuity payments before they died only the following payments are authorised payments under the annuity contract:
- the continuation of the member鈥檚 lifetime annuity for the remainder of any guarantee period that applied for the contract 鈥� see PTM071500,
- the provision of a further annuity to a dependant or nominee of the member 鈥� see PTM072200, and
- an annuity protection lump sum death benefit 鈥� see PTM073400.
A lifetime annuity contract can provide for more than one of the benefits to be paid. 聽The lifetime annuity contract may pay a benefit to more than one dependant or nominee.聽 Whether or not the benefits are available on the member鈥檚 death, and in what form or amount will be a specified under the terms of the annuity contract.
Money purchase benefits payable following the death of a member receiving scheme pension
Following the death of a member who was being paid a scheme pension under a money purchase arrangement (which includes cash balance arrangements), the following authorised benefits can be provided:
- the continuation of the member鈥檚 scheme pension for the remainder of any guarantee period that applied for that scheme pension 鈥� see PTM071500,
- a 诲别辫别苍诲补苍迟蝉鈥� annuity 鈥� see PTM072200,
- a 苍辞尘颈苍别别蝉鈥� annuity - see PTM072200,
- a 诲别辫别苍诲补苍迟蝉鈥� drawdown pension 鈥� see PTM072400,
- a 苍辞尘颈苍别别蝉鈥� drawdown pension 鈥� see PTM072400,
- a 诲别辫别苍诲补苍迟蝉鈥� scheme pension 鈥� see PTM072100, or
- an annuity protection lump sum death benefit 鈥� see PTM073400.
If a dependant鈥檚 pension is small, in certain circumstances it may be paid as a trivial commutation lump sum death benefit 鈥� see PTM073700. 聽A 苍辞尘颈苍别别蝉鈥� pension cannot be commuted into a trivial commutation lump sum death benefit.
Benefits payable following the death of a member receiving drawdown pension
Following a member鈥檚 death any remaining funds in the member鈥檚 drawdown pension fund or flexi-access drawdown fund may be used to:
- provide a drawdown pension fund lump sum death benefit (see PTM073500) or flexi-access drawdown fund lump sum death benefit (see PTM073600),
- pay a charity lump sum death benefit 鈥� see PTM073900,
- purchase a 诲别辫别苍诲补苍迟蝉鈥� annuity 鈥� see PTM072200,
- purchase a 苍辞尘颈苍别别蝉鈥� annuity - see PTM072200,
- provide 诲别辫别苍诲补苍迟蝉鈥� drawdown pension 鈥� see PTM072400,
- provided 苍辞尘颈苍别别蝉鈥� drawdown pension 鈥� see PTM072400, or
- provide a 诲别辫别苍诲补苍迟蝉鈥� scheme pension 鈥� see PTM072100.
If a dependant鈥檚 pension is small in certain circumstances it may be paid as a trivial commutation lump sum death benefit 鈥� see PTM073700. 聽A 苍辞尘颈苍别别蝉鈥� pension cannot be commuted into a trivial commutation lump sum death benefit.
Benefits payable following a member鈥檚 death under a defined benefits arrangement
Sections 167 and 168, Part2 Schedule 28 and Part 2 Schedule 29 Finance Act 2004
The type of authorised benefits that may be provided following the member鈥檚 death depends on whether or not the member had put benefits into payment before they died.聽A member may have had a mixture of rights that have gone into payment and uncrystallised rights under a pension scheme when they died.
A defined benefits arrangement can provide:
- a defined benefits lump sum death benefit 鈥� see PTM073100, and
- a 诲别辫别苍诲补苍迟蝉鈥� scheme pension 鈥� see PTM072100.
whether or not the member had put any of their benefits into payment before they died.
If the member was in receipt of a scheme pension before they died, the following death benefits may also be provided:
- the continuation of the member鈥檚 scheme pension for the remainder of any guarantee period that applied for that scheme pension 鈥� see PTM071500; and
- a pension protection lump sum death benefit 鈥� see PTM073300.
If a dependant鈥檚 pension entitlement is small in certain circumstances it may be paid as a trivial commutation lump sum death benefit 鈥� see PTM073700.