The National Health Service Superannuation Scheme (2008 Section) (Scotland) Regulations 2013

Lump sum death benefits

Lump sum benefits on death: introduction

2.E.16.—(1) A lump sum is payable in accordance with this Chapter if—

(a) a member, a recent leaver or a deferred member dies before reaching age 75; or

(b) a pensioner member, on or after reaching age 75, dies except in the circumstances described in regulation 2.E.21 (pension payable when member dies on or after reaching age 75).

(2) Paragraph (1) is subject to the following provisions of this Chapter.

(3) This regulation does not apply if—

(a) the member is—

(i) a pensioner member; or

(ii) a pension credit member who dies after any benefits attributable to the pension credit have become payable; and

(b) the death takes place more than 5 years after the member’s pension becomes payable.

Amount of lump sum: single capacity members and recent leavers (disregarding regulation 2.D.5 employments)

2.E.17.—(1) The lump sum payable on the death of an active member or a non-contributing member, who is not also a deferred member or a pensioner member, is an amount equal to twice the member’s reckonable pay and, in the case of a 2008 Section Optant, this is subject to regulation 2.K.23 (lump sum payable on the death of a 2008 Section Optant who is in receipt of a lower tier ill health pension under regulation E3 of the 2011 Regulations) and, in the case of a Waiting Period Joiner, this is subject to regulation 2.L.4 (lump sum payable on death).

(2) Subject to regulations 2.E.21 (pension payable when member dies on or after reaching age 75) and 2.E.22 (payment of lump sums or pensions on death), the lump sum payable on the death of a pensioner member, who is not also an active member, a non-contributing member or a deferred member, is, in respect of each pension to which the member is entitled, the lesser of—

(a) an amount equal to 5 times the annual rate of the pension (other than any additional pension), less the amount of the pension payments already made to the member; and

(b) an amount equal to twice the member’s reckonable pay by reference to which the pension was calculated, less the aggregate of—

(i) any lump sum paid to the member when the pension came into payment as a result of the member exercising the option under regulation 2.D.14 (general option to exchange part of pension for lump sum); and

(ii) in the case of a 2008 Section Optant, the lump sum paid to the Optant under regulation 2.K.12 (amount of pension and lump sum to be paid to a 2008 Section Optant).

(3) The lump sum payable on the death of a deferred member, who was not an active member, a non-contributing member or a pensioner member, is an amount equal to the member’s deferred annual pension, multiplied by 2.25.

(4) The lump sum payable on the death of a recent leaver is an amount equal to the deferred annual pension to which the person would have been entitled if the person were entitled to such a pension calculated by reference to the pensionable service the recent leaver was entitled to count in the service that has ceased, multiplied by 2.25.

(5) In this regulation, references to a member’s deferred annual pension are to the annual pension, in respect of any period of pensionable service, to which the member would have been entitled under regulation 2.D.1 (normal retirement pensions) if on the date of death the member had become entitled to such a pension (other than any additional pension).

(6) The reference in paragraph (2)(a) to the annual rate of the member’s pension is to the member’s pension after it has been reduced to take account of—

(a) the exercise by the member of an option under regulation 2.D.14; and

(b) in the case of a 2008 Section Optant, the lump sum paid to the Optant under regulation 2.K.12 (amount of pension and lump sum to be paid).

(7) If a pensioner member exercised the option under regulation 2.D.17 (election to allocate pension), the reference in paragraph (2)(a) to the amount of the pension payments already made to the member is a reference to the amount of the pension payments that would have been made apart from the election.

(8) For the purposes of this regulation, the fact that a person—

(a) was an active member or a non-contributing member in service in an employment in respect of which the member has exercised the option under regulation 2.D.5 (partial retirement: members aged at least 55);

(b) is a deferred member as a result of service in an employment in respect of which the member has exercised that option; or

(c) is a pensioner member by virtue of being entitled to a pension under that regulation,

is ignored.

Amount of lump sum: dual capacity members (disregarding regulation 2.D.5 employments)

2.E.18.—(1) Paragraph (2) applies for determining the lump sum payable by virtue of this regulation on the death of a member who—

(a) was an active member or a non-contributing member otherwise than in service in an employment in respect of which the member had exercised the option under regulation 2.D.5 (partial retirement: members aged at least 55); and

(b) was also a pensioner member.

(2) Subject to paragraph (4), the lump sum is an amount equal to the sum of—

(a) 5 times the annual rate of pension—

(i) payable under regulation 2.D.8(5) (early retirement on ill health: active members and non-contributing members), if the deceased had not reached age 65; or

(ii) payable under regulation 2.D.1 (normal retirement pensions), if the deceased had reached age 65,

to which the member would have been entitled—

(aa) in the case of a deceased active member, at the member’s date of death; and

(bb) in the case of a deceased non-contributing member, on the last day of the member’s pensionable service; and

(b) in respect of each pension to which the person has been entitled for less than 5 years, the lesser of—

(i) 5 times the annual rate of the pension payable after exercising any option under regulation 2.D.14 (general option to exchange part of pension for lump sum), less the amount of the pension payments already made to the member; and

(ii) an amount equal to twice the member’s reckonable pay by reference to which the pension was calculated, less any lump sum paid to the member when the pension came into payment as a result of the member exercising the option under regulation 2.D.14.

(3) If the pensioner member exercised the option under regulation 2.D.17 (election to allocate pension), the reference in paragraph (2)(b) to the amount of the pension payments already made to the member is a reference to the amount of the pension payments that would have been made apart from the election.

(4) In the case of a 2008 Section Optant—

(a) the reference to the annual rate of pension in paragraph (2)(b)(i) is to the annual rate of pension after it has been reduced to take account of the lump sum paid to the Optant under regulation 2.K.12 (amount of pension and lump sum paid to a 2008 Section Optant); and

(b) the amount of the Optant’s reckonable pay for the purposes of paragraph (2)(b)(ii) must be reduced by the aggregate of—

(i) the amount of the lump sum paid to the Optant under regulation 2.K.12; and

(ii) the lump sum under regulation 2.D.14 referred to in paragraph (2)(b)(ii).

Amount of lump sum: dual capacity members (members with pensions under regulation 2.D.5)

2.E.19.—(1) Paragraph (2) applies for determining the lump sum payable by virtue of this regulation on the death of a member who—

(a) was an active member or a non-contributing member in service in an employment in respect of which the member has exercised the option under regulation 2.D.5 (partial retirement: members aged at least 55); and

(b) was a pensioner member by virtue of being entitled to a pension under that regulation.

(2) The lump sum is an amount equal to the sum of—

(a) twice the appropriate fraction of the member’s reckonable pay in that employment at the date of death; and

(b) if the member had been entitled to any pensions under regulation 2.D.5 for less than 5 years, the lesser of—

(i) the total of the guarantee amounts for each of those pensions (see paragraph (3)); and

(ii) the aggregate lump sum cap (see paragraph (4)),

and, in the case of a 2008 Section Optant, this is subject to regulation 2.K.23 (lump sum payable on the death of a 2008 Section Optant who is in receipt of a lower tier ill health pension under regulation E3 of the 2011 Regulations).

(3) The guarantee amount for a pension under regulation 2.D.5 is 5 times the annual rate of the pension at the date of death, less the amount of the pension payments already made to the member in respect of the pension.

(4) The aggregate lump sum cap is equal to twice the appropriate fraction of the reckonable pay by reference to which the pension to which the member became entitled on last exercising the option under regulation 2.D.5 (partial retirement: members aged at least 55) was calculated, less the total of any lump sums paid to the member—

(a) in exchange for pensions under regulation 2.D.5 as a result of the member exercising the option under regulation 2.D.14 (general option to exchange part of pension for lump sum); and

(b) in the case of a 2008 Section Optant, the lump sum paid to that Optant under regulation 2.K.12.

(5) In this regulation “the appropriate fraction” means—

where—

DPS is, where the member continues in pensionable service as an active member or a non-contributing member on the option day (or the last such option day if the option has been exercised more than once), the total number of days which do not form part of the specified percentage of pensionable service at the option day; and

TDPS is the aggregate of DPS and the total number of days of pensionable service (at the option day or the last such option day if the option has been exercised more than once) which forms part of the specified percentage of pensionable service.

Amount of lump sum: pension credit members

2.E.20.—(1) The lump sum payable on the death of a pension credit member who dies before any benefits derived from the member’s pension credit have become payable is an amount equal to the amount of the annual pension to which the member would have become entitled under regulation 2.D.2 (pension credit members) if the member had reached age 65 on the date of death, multiplied by 2.25.

(2) The lump sum payable on the death of a pension credit member who dies after a pension under that regulation has become payable is equal to the lower of—

(a) the annual amounts of the pension that would have been payable to the member during so much of the period of 5 years beginning with the date on which the pension became payable as falls after the date of death; and

(b) the amount produced by the formula—

where—

RP is the amount as at the valuation day of the reckonable pay of the debit member from whose rights the pension credit member’s pension credit is derived; and

CLS is the amount of the lump sum (if any) paid to the pension credit member as a result of the member exercising the option under regulation 2.D.14 (general option to exchange part of pension for lump sum) on becoming entitled to the pension under regulation 2.D.2 (pension credit members).

(3) For the purposes of paragraph (2), the annual amount of the pension is taken to be the sum of—

(a) the annual amount of the pension as at the beginning date for that pension; and

(b) the increase (if any) in that annual amount under the Pensions (Increase) Act 1971(1) payable as at the date of death.

(4) In this regulation—

“valuation day” means the day referred to in section 29(7) (the pension and annuity requirements) of the 1999 Act; and

“the beginning date”, in relation to a pension, has the meaning given in section 8(2A) of the Pensions (Increase) Act 1971.

Pension payable when member dies on or after reaching age 75

2.E.21.—(1) If, on or before 5th April 2011, a pensioner member or a pension credit member died—

(a) on or after reaching age 75; and

(b) before the fifth anniversary of the date on which the member’s pension became payable,

an annual pension, calculated in accordance with paragraph (2), is payable from the day following the date of the member’s death until the anniversary referred to in sub-paragraph (b).

(2) The pension payable under paragraph (1) is determined by—

(a) calculating the amount of the lump sum that would have been payable to the pensioner member or pension credit member under regulation 2.E.17(2) (single capacity members and recent leavers) or, as the case may be, regulation 2.E.20 (pension credit members) as if on the day the member died the member had not reached age 75; and

(b) converting any amount determined in sub-paragraph (a) to an annual pension payable for the period specified in paragraph (1), by reference to guidance and tables provided by the scheme actuary for the purpose.

(3) The “beginning date” of the pension calculated in paragraph (2) is, for the purposes of the Pensions (Increase) Act 1971, the day immediately following the date of death of the pensioner member or pension credit member.

(4) The pension calculated under this regulation is payable in accordance with regulation 2.E.22 (payment of lump sums or pensions on death).

Payment of lump sums or pensions on death

2.E.22.—(1) A lump sum payable under regulation 2.E.16 (lump sum benefits on death) or a pension payable under regulation 2.E.21 (pension payable when member dies on or after reaching age 75) must be paid in accordance with this regulation.

(2) The lump sum or pension must be paid to the member’s personal representatives, except so far as it is payable to a different person or body under paragraph (4), (6) or (10).

(3) A member may give notice to the Scottish Ministers—

(a) specifying—

(i) the member’s personal representatives;

(ii) one or more other individuals; or

(iii) one incorporated or unincorporated body,

to whom the lump sum or pension is to be paid; and

(b) where two or more individuals are specified, specifying the percentage of the payment payable to each of them.

(4) If the member—

(a) has given notice under paragraph (3) specifying a person; and

(b) has not revoked that notice,

the lump sum or pension (or, as the case may be, the percentage of it specified in respect of the person) may be paid to the person, unless paragraph (5) or (7) applies.

(5) This paragraph applies if—

(a) the person specified in the notice has died before the payment can be made; or

(b) payment to that person is not, in the opinion of the Scottish Ministers, reasonably practicable.

(6) If the member—

(a) leaves a surviving adult dependant; and

(b) has not given notice under paragraph (3) or has revoked any notice so given,

the lump sum or pension may be paid to that person unless paragraph (7) applies.

(7) This paragraph applies if the person to whom the lump sum or pension (or a specified percentage of the lump sum or pension) would otherwise be payable has been convicted of an offence specified in regulation 2.J.8(2) (forfeiture of rights to benefit) and the Scottish Ministers have directed, as a consequence of that conviction, that the person’s right to a payment in respect of the member’s death is forfeited.

(8) A notice under paragraph (3)—

(a) must be given in writing; and

(b) may be revoked at any time by a further notice in writing.

(9) The Scottish Ministers may pay the lump sum to any person claiming to be the member’s personal representative or otherwise to fall within paragraph (3)(a), without requiring proof that the person is such a person concerned, if the lump sum does not exceed—

(a) £5,000; or

(b) any higher amount specified in an order made under section 6(1) of the Administration of Estates (Small Payments) Act 1965(2) as the amount to be treated as substituted for references to £500 in section 1 of that Act.

(10) The member’s personal representatives may, as part of the distribution of the member’s estate, give irrevocable notice to the Scottish Ministers—

(a) specifying—

(i) one or more individuals; or

(ii) one incorporated or unincorporated body,

to whom the benefit of the pension under regulation 2.E.21 (pension payable when member dies on or after reaching age 75), from the date of receipt of the notice by the Scottish Ministers, is to be assigned; and

(b) where two or more individuals are specified under sub-paragraph (a)(i), specifying the percentage of the pension payable to each of them,

and the pension (or, as the case may be, the percentage of it specified in respect of the person) may be paid to the person or body, unless paragraph (11) applies.

(11) This paragraph applies if—

(a) the person specified in the notice has died before the payment can be made;

(b) payment to that person is not, in the opinion of the Scottish Ministers, reasonably practicable; or

(c) the person to whom the pension (or a specified percentage of the pension) would otherwise be payable has been convicted of an offence specified in regulation 2.J.8(2) (forfeiture of rights to benefits) and the Scottish Ministers have directed, as a consequence of that conviction, that the person’s right to a payment in respect of the member’s death is forfeited.

(12) In the case of a 2008 Section Optant, this regulation is subject to regulation 2.K.20.

(13) In the case of a Waiting Period Joiner, this regulation is subject to regulation 2.L.2.

Tax treatment under the 2004 Act of lump sums payable on pensioners’ deaths

2.E.23.—(1) A pensioner’s lump sum (less any amount deducted under paragraph (4) where that applies) is to be treated for the purposes of the 2004 Act as a pension protection lump sum death benefit if the member has given the scheme administrator a statement in writing that any such lump sum is to be treated as such a benefit.

(2) In this regulation “pensioner’s lump sum” means—

(a) a lump sum payable under regulation 2.E.16 (lump sum benefits on death) to which regulation 2.E.17(2) (single capacity members and recent leavers) applies; or

(b) so much of a lump sum payable under regulation 2.E.16 as is calculated under regulation 2.E.18(2) (dual capacity members).

(3) Paragraph (4) applies if the person who is the scheme administrator for the purposes of section 206 (special lump sum death benefits charge) of the 2004 Act (“the administrator”) is liable for tax under that section in respect of a pension protection lump sum death benefit.

(4) The administrator may deduct from the lump sum the tax payable in respect of it.

(1)

1971 c.56.

(2)

1965 c.32. Section 6(1) was amended by the section 24(2) of the Parliamentary Pensions Act 1972 (c.48), section 6(3) of the National Debt Act 1972 (c.65), paragraph 20 of Schedule 9 to the Friendly Societies Act 1974 (c.46), section 36(2) of, and Schedule 4 to, the Judicial Pensions Act 1981 (c.20), section 1(1) of, and Part 1 of Schedule 1 to the Statute Law (Repeals) Act 1986 (c.12), section 6 of, and Schedule 4 of, the Parliamentary and other Pensions Act 1987 (c.45) and paragraph 1 of Schedule 12 to the Merchant Shipping Act 1995 (c.21).