Death in service payments are paid to your family or chosen beneficiary from your pension fund if you die before you retire.
New death in service provision for health and care staff during the coronavirus pandemic
Following pressure from UNISON and other health unions, the government has announced a COVID-19 death in service scheme for England for NHS and care staff, with funding provided to allow devolved administrations to introduce similar schemes.
The NHS and Social Care Coronavirus Life Assurance Scheme 2020 pays out a flat rate of £60,000 to the families of staff who die from the virus during the course of their work. This is separate and additional to any death in service benefits that may be payable to them from NHS pension scheme membership.
It applies to ‘frontline’ health and social care staff, including roles like porters and cleaners as well as clinical staff. Eligibility is based on having worked in a care environment where patients /service users with COVID-19 were present at any point in the two weeks prior to developing symptoms.
The life assurance scheme was originally just for the NHS staff but will now apply to at least care workers in other public services schemes. Details have yet to be clarified however, we have been advised that for the LGPS the £60,000 lump sum will be in addition to the benefits from the LGPS in England. The devolved administrations are considering the detail of how the scheme will operate in their countries.
Introduction to death in service benefits in your pension scheme
If you die in service while contributing to your workplace pension scheme then your dependents and/or estate will receive the benefits as set out in the rules or regulations of your scheme. You can find how the benefits would be calculated and the level of cover by checking your scheme online or getting a copy of the scheme booklet checking that it is up to date.
There are usually 3 types of benefit paid on death in service:
A death in service lump sum
The amount paid under death in service varies and is commonly a multiple of your pensionable pay at death (many schemes will not take into account reductions in pensionable pay that may have occurred because of your ill health before death). For example, it is three times pensionable pay in the Local Government Pension Scheme and twice pensionable pay in the NHS Pension Scheme.
Spouses /partners pensions
In addition to a death in service payment it’s also common for pension schemes to pay out a survivor’s pension. Usually to a spouse, co-habiting partner, civil partner. The proportion of the member’s pension paid out as a survivor pension varies between schemes and some classes of survivors are not based on the member’s full service. In the LGPS and the NHSPS the member’s pension is notionally increased by basing it on ill-health retirement at the date of death and it is a proportion of that pension that is then payable as a survivor’s pension.
Many schemes provide eligible children’s pensions in addition to survivor’s pensions including the NHSPS and LGPS. Eligible children in public service schemes are usually payable to age 18 or until age 23 if in full time /vocational training. Many employers in the private sector offer flexible benefits which are not necessarily linked to membership of the pension scheme and life assurance is frequently one of these Depending on where you work and your employer’s benefit package you may be able to purchase additional life assurance if you wish to.
What if the employer does not offer a pension scheme and you are in a minimum auto-enrolment scheme like NEST?
Normally the value of your cash pot will be paid either to the person or persons you have nominated, or your estate. Your employer might provide additional life cover outside the pension arrangement.
How will death in service payments be paid?
It is usual for the scheme manager, trustees or insurance company to have discretion, to pay the death in service lumps sum to who the member has nominated to receive if they have completed an expression of wish form, the scheme can also pay the personal representatives or any person appearing to be a relative or dependant of the member if a form has not been completed or circumstances have changed e.g. the nominee has predeceased the member.
So, if you want to nominate someone you should always take care in ensuring that your nominations are up to date.
What if an employer threatens to withdraw payments for life cover
While you remain a contributing member of a pension scheme you are automatically covered by its death in service provisions. Your employer may offer increased life assurance cover outside the scheme.
If so the cost of insuring death in service payments is generally pretty low so it’s relatively rare for an employer to look to withdraw these but if your employer proposes to make detrimental changes to your terms and conditions you should contact your UNISON branch and ask them to start talks with your employer.
If many employees oppose the cuts, the employer is more likely to back down before moving to the next step, as there may be other ways they can achieve the savings they are looking to make.
- Check death in service arrangements for your workplace including the pension scheme. You should be aware of death in service arrangements.
- Check on the website or your employers pension department.
- Is the death in service cover sufficient or do you want to get additional cover?
If you are not in a pension scheme be aware of the automatic life and ill health cover at no extra cost if you join the pension scheme.
Pensions for retired returners
As a general rule, if you return to NHS employment while in receipt of your NHS pension this will not be affected if you are already over your scheme’s Normal Pension Age at the point of returning. Or if you have incurred a reduction to your pension for drawing it early.
In addition, the government’s Coronavirus Bill contains measures which will allow recently retired healthcare professionals to return to work, or increase their hours, without any negative impact on their pension for the duration of the COVID-19 pandemic.
This is important as some retired NHS pensioners would otherwise be in danger of having their pension benefits reduced or suspended if they return to NHS employment. Typically those with Special Class and Mental Health Officer status who return to NHS employment prior to age 60.
NHS Pensions have a very helpful section on their website where you can find more information about returning to work after retirement from the NHS.
Death in service
How can I decide if the death in service benefit would be enough to support my family?
Although the death in service benefit may seem like a lot of money, you may want to speak to a financial advisor to decide if a separate life insurance policy would be better for you and your family.
I’m not a member of a work pension scheme. Will my family get a payment if I die?
Possibly. Death in service payments are often based on group life insurance policies taken out by employers and are not related to pension schemes.
Ask your employer to explain the benefits available to you.
What should I do if I think my employer wants to withdraw death in service benefits?
Tell your UNISON rep. If your UNISON rep can show that lots of people are against the change, your employer may back down.