What happens to my NHS pension when I die?

Cash lump sum on death

If you die before retiring or within five years of your retirement, a lump-sum death benefit may be due. This one-time lump sum will be paid directly into the bank account of your legal spouse or civil partner, unless you’ve nominated someone else to receive it via the Death Benefit Nomination Form.

The amount payable will depend on a range of factors, but will take into account the amount of retirement benefits that have already been received up to the date of death. If you had already retired and chose to exchange some of your pension for a larger lump sum when you finished work, it may be that no further lump sum is available.

If a death benefit lump sum is due, it must be paid by the scheme administrator within two years, or it will attract a tax charge of up to 45%.

Tax treatment depends on your individual circumstances and may be subject to change in the future

Adult dependants’ pension

An adult dependant’s pension is paid every month to your surviving spouse, registered civil partner or a nominated qualifying partner from the date of your death. You can’t nominate anyone else to receive it.

The value of the pension depends on the length of your membership and which part of the scheme you belonged to.

If you were still a member of the NHS Pension Scheme after the 1st April 2008, an adult dependant’s pension is payable for life - regardless of whether your spouse or partner remarries. However, if your membership ended before this date, the adult dependant’s pension will usually end if the recipient remarries, forms a civil partnership or lives with someone else as a partner. 

Child dependants’ pension

If you leave behind child dependants, a child’s pension may also be payable. As well as your own biological children, this could be applicable to stepchildren, your partner’s children or to other dependants including nephews, nieces and grandchildren.

Again, eligibility criteria depends on whether your membership extended beyond 1st April 2008. If it did, a child dependant may be eligible up to the age of 23. Even if they are over 23, they can receive the pension if they are incapable of earning a living due to permanent disability.

If your scheme membership ended before 1st April 2008, a child’s pension may be paid only if the dependant child is under the age of 17 or is aged between 17 and 22 and in full-time education. 

Again though, children who don’t fit this criteria can still receive the pension if they are incapable of earning a living due to permanent disability.

How NHS survivor benefits are calculated

The value of the survivor pension package you leave behind depends largely on three factors:

• the value of the pension benefits you built up as a member
• the section of the scheme you built them in
• your status when you die.

Below you can see the basic calculations that are used for a range of scenarios in each part of the scheme, starting with the 1995 section.

Understanding the calculations

Where we mention a ‘notional’ pension, that’s the amount that would have been payable at the time of your death. A ‘tier 2 ill health pension’ is an enhanced pension paid out to members who are no longer able to work due to illness, injury, or in this case death.

A ‘deferred’ member is a member who left the scheme after two or more years’ membership and chose to leave their benefits in the scheme.

Remember, if you don’t have at least two qualifying years of membership, some of these benefits won’t apply and others will be adjusted. Speak to a Specialist Financial Adviser from Wesleyan Financial Services if you want to find out more.

Survivor benefits in the 1995 NHS pension section

Survivor benefits in the 2008 NHS pension section 

Benefits in the 2008 section of the NHS Pension Scheme are often calculated on the basis of ‘reckonable pay’. Reckonable pay is the average of the best three consecutive years’ pensionable pay received over the last 10 years before retirement. Find out more in our guide to the NHS Pension Scheme.

Survivor benefits in the 2015 NHS pension scheme 

The 2015 NHS Pension Scheme is a career average scheme, based on 1/54th of your pensionable earnings each year. The pension you get is increased each year by a method known as revaluation – which is why you’ll see 'revalued earnings’ featured in the table below:

For more details on all of the above calculations, visit the NHS Pension Scheme members hub. Or, for help planning your financial future and making the most of your NHS pension benefits, you can book an appointment with one of our Specialist Financial Advisers.

How to claim survivor benefits

It’s not the easiest of conversations to have with your family, but as you get older, it is important that everyone knows how to claim their entitlement as and when the time comes.

Dependant pensions must be claimed and applied for, using the appropriate forms. If the member was still working for the NHS when they die, these forms will usually be sent by the employer to the next of kin.

If the member was already retired and drawing their pension, the surviving spouse or partner will need to notify the scheme of the member’s death, quoting the member’s membership (SD) number and National Insurance number. The scheme will then issue the forms and write to the member’s spouse or partner to request any documentation required.

Notifying the scheme as quickly as possible helps to ensure no overpayments are made to the member. Any overpayments would need to be paid back and can cause unnecessary extra admin at an already difficult time.

Affected by the McCloud judgement?

If you're affected by the recent McCloud judgement and you die before drawing benefits from the NHS pension scheme, your dependents will be given the same choices you would have had.

For more information on the McCloud judgement and what it means for you, see our main NHS Pension Scheme guide.

A quick word on tax…

Always keep in mind that pension benefits are treated as taxable income, so there can be tax implications to survivor benefits.

For example, there could be inheritance tax (IHT) to consider. Where the lump sum on death benefit is paid to a spouse or civil partner, it’s not included in an inheritance tax assessment – but it is included if the money goes to a nominee or nominated qualifying partner.

To make sure you understand all the tax implications, it might be worth seeking professional advice.

Bear in mind that advice relating to estate planning and IHT is not regulated by the Financial Conduct Authority.