- Helping members of occupational pension schemes to better understand their benefits.

25th August 2019
:: Scheme Member | My Personal Circumstances | My Dependants | Preserved members of a MP scheme

My Dependants – Preserved Members
This Factsheet discusses some of the main issues relating to your family and immediate relationships and how this can affect your retirement benefits.
It is written for people with a preserved benefit held within of an employer sponsored money purchase pension scheme (‘money purchase’ is sometimes called ‘defined contribution’).
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This Factsheet looks at the main issues about your family and dependants that YOU should be thinking about when it comes to retirement planning. It is designed to make you think about various aspects of your immediate relationships, and how these have a bearing upon your pension benefits.
Some of the points are more obvious than others, but they are all important, so take a while and think about you, your family and your immediate relationships.
If you are intending to get advice from a Financial Adviser these are the types of issues you should expect to be asked to consider (and often many more).
For information on spouse’s or partner’s benefits see My Marital Status.
Why is my family important in terms of my pension benefit?
Employer sponsored money purchase pension schemes can provide much more than a pension for scheme members. Benefits can be paid on the death of a scheme member and should anything happen to you, then your partner, children and dependants may be entitled to:
  • An income
  • A lump sum
Benefits payable to your dependants on your death after retirement can be expensive and can be overlooked in your current pension planning.
When making enquiries with your scheme make sure any benefits they quote are relevant to you as a preserved member.
Do benefits differ on death before or after retirement?
Any pension benefits your scheme provides which are payable to your family on death can differ considerably depending upon whether death occurs before or after you commence drawing your benefits.
The main differences will be that on death before retirement the period over which you have contributed will be shorter (because you are a preserved member) and the investment period will be shorter. On death before retirement, the whole fund is available to provide dependents benefits whilst on death in retirement the dependents benefit will relate to choices you make at retirement.
The difference can be substantial and therefore this aspect of your pension benefit should not be taken for granted.   
Who would be included as a ‘dependant’?
In terms of who gets what on your death depends upon the Rules of your pension arrangement and this may also involve the administrators who may have discretionary powers.
Where one pension scheme may rigidly define ‘child or children’, another may refer simply to ‘dependant’. Don’t assume that one description fits all and remember that schemes do differ in terms of what they provide and to whom. In the event that you have no dependent who would qualify in terms of the rules, the benefits payable on your death will be paid into your estate.
Rules can change from time to time reflecting changes in legislation or social situations, so it’s always a good idea to review your benefits regularly. However, any changes may not necessarily apply to your benefits as a preserved member – it depends on what changes are made.
The definition of dependent, which is important for you, is that written in the version of the Rules of your pension arrangement that applied on the date you ceased to be an active member of the scheme.
Is there any other definition of dependant?
Yes, from 6th April 2006 new pension were rules introduced by HM Revenue and Customs (HMRC), which set out the definition for the term dependant as who can receive benefits directly from a pension arrangement. It is:
A person who was married to, or a civil partner of, the member at the date of the member’s death is a dependant of the member.
A child of the member is a dependant of the member if the child
  • has not reached the age of 23, or
  • has reached the age of 23, and in the opinion of the scheme administrator, was at the date of the member’s death dependent on the member because of physical or mental impairment.
A person who was not married to the member or was not in a civil partnership with the member at the date of the member’s death and is not a child of the member is a dependant of the member if, in the opinion of the scheme administrator, at the date of the member’s death the person was financially dependant on the member, the person’s financial relationship with the member was one of mutual dependence, or the person was dependant on the member because of physical or mental impairment.
HMRC – Registered Pension Scheme Manual Glossary – Crown Copyright
So it’s not only children who are dependant?
No. A dependant could include a child, a parent, a sibling or indeed any other person if it meets the definition of HMRC. Remember that your own pension arrangement may have its own definition, which may be narrower than that of HMRC. Keep in mind too that the administrators of your scheme may have powers of discretion.
Does a dependant have to be related to me?
Not necessarily. The Rules or administrators may determine that non-related children or dependants could be granted benefits in the event of your death. So for example, your partner’s children from a previous marriage may be eligible if they meet any requirement laid down by the scheme Rules.
To check how your own circumstances might be treated, you should contact the administrators or administrators of your pension scheme.
What do Scheme Rules say about ‘dependency’?
In the strictest sense, a dependant is someone who needs your support whether this is financial or non-financial support but when it comes to pension schemes, HMRC’s definition of dependant overrides all others. In the first instance, your arrangement will apply its own rules but in the absence of a qualifying dependent under those rules, it may use the wider HMRC definition.
Pension arrangements may define dependency within the Rules, although the definitions may vary considerably from one arrangement to another.
Some scheme Rules have very narrow definitions and this could affect what benefits would be payable in the event of your death - and to whom.
Be aware as well, that pension arrangements may have changed so don’t rely on old booklets which may have since been updated. If you are concerned about who should receive benefits make sure that your wishes are recorded in writing and given to the administrator.   
What’s the difference between financial and non-financial support?
This is important because the Rules of a pension arrangement may be very precise in who is deemed a dependant.
Rules may require, for example, that a child or dependant must be financially dependent upon you at the time of your death in order to qualify for benefits from the scheme.
Other schemes may simply require that the child or dependant was in your care or required your ‘support’ immediately prior to your death – and this may not necessitate that you were directly or indirectly financial supportive at that time.
Is the age of my dependants a factor to consider?
Your dependents’ ages will have a bearing on any benefits payable on your death.
This is because where there are survivors’ pension payable on your death, their ages will determine the amount of benefit payable. The older they are, the more they will receive and the younger they are, the less they will receive.
Are dependants’ benefits split equally?
There is no legal requirement stating that benefits payable on your death have to be split equally.
A pension arrangement may decide in what proportion benefits are distributed to dependants although legislation does have specific regulations to cover a spouse or civil partner.
On the death of a member, dependant’s pensions are divided equally.
Can I specify who gets what on my death?
The benefits that are available on your death will depend upon the Rules although the administrators may have discretionary powers to make payments to other parties so long as the HMRC rules are not breached.
Some schemes allow you to complete a Nomination Form or Expression of Wish Form (or some similarly entitled document), so you can express your wishes regarding your beneficiaries. You should remember however, that administrators are not necessarily obliged to take this into account in making their decision.
If you have not completed a Nomination Form, get in touch with your pension scheme and make a written nomination, as this type of document helps the administrator to know what your wishes are.
Consider contacting your pension scheme as soon as there is a change in respect of your dependants – such as the birth of your child. If you have previously completed a Nomination Form (or similar document) which details what you would like to happen in the event of your death, this may need to be revisited if your circumstances changes.
Keeping your scheme appraised of changes could save considerable heartache or even prevent unnecessary financial difficulty for the person or people you wish to protect.
What if I have no dependants according to the rules of the arrangement or the HMRC rule?
Where there is no-one eligible to receive a benefit from the arrangement, in general any money which relates to you would be paid into your estate and settled in accordance with your direction under your Will. If you have no Will, the Courts will determine who should receive the benefit. Unless your legal representatives pursue the scheme administrator for the benefits, the funds could remain with the scheme forever.
Summary & Key Points
When making enquiries about your preserved benefit it is very important that you make it clear that you are a preserved member.
On average, people change jobs every 5 to 6 years. It is possible therefore, that you will have more than one pension benefit. For each pension benefit, you need to consider the following items:
  • Consider your personal circumstances. Do you have dependants? Are dependants’ benefits important to you?
  • Does your pension scheme provide dependants’ benefits on your death?
  • Do your dependants meet the criteria that your pension scheme sets to qualify for benefits?
  • If your pension scheme provides dependants’ benefits, do these differ if your death occurs before or after you commence drawing your pension?
  • Have your circumstances changed at all in terms of your dependants?
  • Have you completed and returned to your pension scheme a Nomination Form in respect of death benefits?
  • Keep informed. Legislation may change. Your circumstances may alter.
  • Money purchase schemes have many forms and can be quite different from one another. Don’t assume that what applies to your money purchase schemes will necessarily apply to other pension arrangements that you may have.
  • HMRC impose rules, which registered pension schemes must conform to.
People seldom have identical pensions and you should avoid drawing comparisons with colleagues whose circumstances may at first appear the same but could emerge as having significant differences.
This is not an authoritative document. Seek professional advice from an appropriately experienced and qualified adviser.
My Dependants v1.1 Preserved MP
Last updated 12/07/2007

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