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The lump sum on death benefit calculation depends on:

  • which Section or Scheme the member was contributing to at the time of their death
  • if the member was an Officer or a Practitioner
  • if the member died while in active NHS employment  

1995 Section

For the 1995 Section, the same year’s pensionable pay used for the dependent’s benefits must also be used for the lump sum on death.

Officers

To calculate the lump sum, we look at the last 3 year's pensionable pay up to the date of death or their last day of membership, whichever is later.

Death of a pensioner

Lesser of either:

  • 5 × annual pension, minus any pension already paid
  • 2 × actual pay at retirement, minus the lump sum paid

Death in pensionable membership

2 × the best of the last 3 years actual pensionable pay.

Death with deferred pension

3 × deferred annual pension.

Practitioners

The lump sum on death benefit is twice the career average uprated earnings.

2008 Section

For the 2008 Section, the same years reckonable pay used for the dependent’s benefits must also be used for the lump sum on death.

To calculate the lump sum, we look at the best 3 consecutive years from the last 10 years of pensionable pay. This is taken from the date of death or last day of service, whichever is later. We then average those best 3 years to calculate the annual reckonable pay.

This is revalued by the increases in inflation. Whichever year is the highest is usually used in the calculation.

Officers

Death of a pensioner

Lesser of either:

  • 5 × annual pension, minus any pension already paid
  • 2 × actual reckonable pay at retirement, minus lump sum paid

Death in pensionable membership

2 × actual reckonable pay.

Death with deferred pension

 2.25 × deferred annual pension.

Practitioners

2 × average uprated Practitioner pensionable income.

2015 Scheme

Death of a pensioner

Lesser of either:

  • 5 × the actual annual pension, minus pension already paid
  • lump sum on death that would have been payable if the member died on the last day of pensionable employment as an active member, minus any lump sum already paid

Death in pensionable membership

Higher of either:

  • 2 × relevant earnings within last 12 months
  • 2 × revalued pensionable earnings for Scheme year falling in the earnings reference period with the highest revalued pensionable earnings

If the member has less than 365 days membership, the earnings used are built up to 365 days using the amount already earned.

The earnings reference period is the period ending on the last day of the Scheme year. This is immediately before the scheme year the member died and beginning on the later of either:

  • the first day of the scheme year in which the member first joined the 2015 Scheme
  • the first day of the 10 scheme year before the scheme year the member died

Death with deferred pension

2.025 × deferred annual pension at date of death.

Read more information of how the lump sum on death benefit is calculated in the Survivors Guide on our website.

Tax

We must deduct the tax charge of up to 45% if the lump sum is paid more than 2 years after we're officially notified of the member’s death.

If you any queries about the tax charge, contact HM Revenue & Customs (HMRC).

You can write to them at:

Pension Scheme Services
HM Revenue & Customs
Ferrers House
Castle Meadow Road
Nottingham
NG1 1BB

If you have any questions about Inheritance Tax, you can find contact details for the Capital Taxes Office on their website.