Pensions and Death in Service: Be Prepared
Many forces families don’t want to think about morbid topics such as death in service benefits and widow’s pensions. The reality is that, as a spouse or partner of a serving soldier, we do need to get up to speed with them and at least know where we stand if the worst happens.
Before I explain each of these, I just want to highlight how important it is for everyone, especially service couples, to have a legal and valid Will. This is one of the stress-free services I provide, which you can read more about here. I have included a glossary of terms at the bottom of this blog which further explain terms marked with a star (*) and also a summary table indicating the lump sum and pension amounts, for easy reference.
In the event of a serving personnel’s death, their eligible dependents will receive certain benefits, which may consist of a tax-free lump sum and a taxable pension for life. If, however, you haven’t nominated your dependents, then this lump sum will be added to you estate. In the circumstance that you married within 6 months of your spouse’s death, or that you are more than 12 years younger than your spouse, the above will be reviewed and may be subject to alteration.
Serving personnel should nominate who they want their lump sum death benefit to be paid to. This can be any person (or several people), or a charity/social club, or a combination of both. This nomination must be made in writing to DBS Veterans UK by completing a Nomination Form (AFPS Form 2) available from the DBS Veterans UK website. If you die without making a valid nomination, then lump sum payments are usually made to your spouse, eligible partner* or any eligible children*. If there is no such person, then it will be paid to your estate. Make sure that nominations for this payment are kept up-to-date with changes to your personal circumstances; a valid nomination takes precedence over any exiting spouse!
In the event of death in service, you must have completed at least 2 years of qualifying service in any Armed Forces Pension Scheme for your dependents to be entitled to any pension. However, a death in service lump sum, 4 times your final pensionable earnings, will be paid to your nominee, spouse, civil or eligible partner regardless of whether you have vested in a pension scheme or not. If there is no surviving nominee, spouse, civil or eligible partner then the lump sum will be split between all eligible children. If none exist, it shall be paid to your estate. In addition to this lump sum, the aforementioned will receive an immediate pension for life, paid as follows; a spouse, civil partner or eligible partner will receive 62.5% of this pension, while eligible children will share the remaining 37.5% (a maximum of 25% per child). If there is no spouse, civil partner or eligible partner, all eligible children will share 100% of the pension (to a maximum of 33.3% per child).
If you leave the Armed Forces having qualified for a Deferred Pension, but you die before that pension comes into payment at State Pension Age, your nominee, spouse, civil partner or eligible partner will receive a tax-free lump sum of 3 times your pension. They will also receive an immediate pension, of the same percentage splits as the death in service pension (as will any eligible children).
If you die whilst in receipt of a pension (i.e. in retirement) your spouse, civil partner or eligible partner will receive 62.5% of that pension. Any dependent children will then share the remaining 37.5% subject to a maximum of 25% per child. If there is no surviving spouse, civil partner or eligible partner, all eligible children will share 100% of the pension, subject to a maximum of 33% per child. There will also be a tax-free lump sum equal to 5 times your pension, less the combined total of all pension payments and lump sum that you had already received since retirement. Eligible children will share the 100% of the lump sum if there is no nominee, surviving spouse, civil partner or eligible partner.
Another option is pension allocation; where you can choose to allocate a part of your annual pension to one or more dependants, provided they are financially dependent on you in order for them to receive an income for life.
Although this is a complex topic, it is useful to have a basic understanding of how it works so that you can at least make your official nomination(s) and safeguard your family if the worst should happen.
Lump Sum and Pension Payment Amounts – Summary
|Lump Sum Amount
(nominee/spouse/ eligible partner)
|Pension amount to be received by spouse/eligible partner||Remainder of pension to be shared by eligible children||Pension amount to be shared by all eligible children (if no spouse/partner exists)|
|Death in Service||4 times final pensionable earning||62.5%||37.5% (max of 25% per child)||100% (max 33.3% per child)|
|Death in Deferment||3 times your pension||62.5%||37.5% (max of 25% per child)||100% (max 33.3% per child)|
|Death in Retirement||5 times your pension||62.5%||37.5% (max of 25% per child)||100% (max 33.3% per child)|
Glossary of Terms
Eligible partner – a cohabiting partner may be eligible to receive a pension providing that it can be demonstrated that a substantial and exclusive relationship existed and that there was no legal reason preventing you from getting married or forming a civil partnership.
Eligible child – an eligible child, biological or adopted, is defined as a child who is under 18 years of age and who was financially dependent upon you on the date of your death. Additionally, those under the age of 23 who are in full-time education or vocational training are also eligible, as are children, of any age, who are unable to obtain gainful employment due to a physical or mental impairment.