Death and your pension

Jan 11, 2022
What happens to your pension when you die?

None of us enjoy thinking about death, and certainly not our own, but it’s important to understand what could happen to your pension and who could benefit, after you’ve gone.

The death benefits that may be payable from your pension are considered separately to your will, and they depend on which type of Scheme and Section you belong to, the options you select, and whether you’re retired or still working when you die.

Here’s a useful guide below, but your Member Guide will have more specific details of your own death benefits. If you’re logged in to your myRPS account, you will find your Member Guide in your home page under ‘My library’.

 1          Death benefits for retired, defined benefit (DB) members

 If you’re retired, and you’re a DB member of the Railways Pension Scheme (RPS), your death benefits could include:

  • Spouse’s pension – payable to a spouse, civil partner or same-sex spouse you were living with at the date of your death. This is usually worth half your basic pension.
  • Dependants’ pension – paid to a person who depended on you financially for two years prior to your death. The value may vary depending on circumstances and will reduce if the eligible dependent is younger than you by 10 years or more.
  • Children’s pension – at least the two youngest eligible children normally receive pensions until they are 18. The youngest child will typically receive 50% of the eligible spouse’s pension and the second child will receive 25%. If an eligible child continues in full-time education after they reach 18, the pension may still be paid, subject to Trustee or Committee agreement.

There may also be a lump sum pay-out to your beneficiaries. The exact amount payable would depend on the amount of benefit you have taken since your retirement. If you have been receiving your pension for five years or more it’s unlikely any lump sum will be paid.

To help speed up the process, it’s important that you complete a Nomination form to let the Trustee know who you'd like the lump sum to be paid to. This can be done quickly and easily by logging into your myRPS account and going to ‘My Nominations’ in the ‘My Pension’ section of your member home page. Otherwise, it could go to the wrong person, or the payment may be delayed which could result in tax being payable.

 2          Death benefits for retired, industry wide, defined contribution (IWDC) members

If you’re a retired IWDC member, then your death benefits will depend almost entirely on how you have taken your pension. For example:

  •  If you have a single annuity, then all payments will stop when you die. That is unless you took a guarantee period, such as 5 years, in which case payments can continue until the end of that time or will be paid as a lump sum. 
  • If you have drawdown, the remaining money could be paid out tax free if you die before the age of 75. If you’re over 75, then it is likely to be added to the beneficiaries’ other income and taxed.

For more information, you would need to speak to your chosen annuity or drawdown provider, as these benefits are not payable directly by IWDC.

 3          Death benefits for active, or preserved, DB members

If you’re an active, or preserved, defined benefit member and die whilst you’re still working, your pension could pay out a lump sum. If you’re younger than 75 when you die, this payment would be tax-free for your beneficiaries. Death benefits may also include a pension to either a spouse, civil partner or dependent child (as in paragraph 1 above) but this would be taxed at their marginal rate of income tax.

 4          Death benefits for active, or preserved, IWDC members

If you’re an active, or preserved, IWDC member, die before your 75th birthday whilst you’re still working, and haven’t started drawing your pension, it can be passed to your beneficiaries tax-free.

 5          How your family can claim

 The Scheme administrator, Railpen, will need to be notified of your death.

 For defined benefit members, this can be done by contacting Railpen directly via:

  • Email: csu@railpen.com
  • Phone: 0800 012 1117 from the UK or +44 1325 342 800 internationally.
  • Post: Customer Services Team, Railpen Limited, PO Box 300, Darlington, DL3 6YJ

 For IWDC members, this will be whichever provider you have chosen for your drawdown or annuity arrangement.

 For security reasons, Railpen will need to confirm at least three of the following for the deceased:

  • Date of birth
  • National Insurance number
  • Pension reference number
  • Full name
  • Full address

 Railpen will also need a copy of the death certificate to proceed.

In all scenarios, your beneficiaries have two years to claim a death lump sum, after which tax may be charged.

Please ensure your friends/family are aware of these requirements.

If you have further questions on death benefits, check your Member Guide. If you’re logged in to your myRPS account, you will find this in your home page under ‘My library’.