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18th May 2012
:: Scheme Member | Redundancy | Redundancy - Children’s death benefits | Active members of a DB scheme

Redundancy: Children's and Dependants' death benefits – Active Members
Quicknote – possible changes caused by redundancy
 
Changing from an Active Member to a Preserved Member in a defined benefit scheme.
 
As an active member of your pension scheme, there may be the benefit of children’s and/or dependants’ pension payable in the event of your death. These may be in addition to a spouse’s* pension, or instead of (where there is no surviving spouse). Not all schemes provide children’s or dependants’ pensions.
 
Examples of children’s pensions on the death of an active member:
  1. Children’s pensions could be payable at a rate of one quarter of your spouse’s pension for up to four children – payable up to age 16, or 21 if in full time education.
  2. Children’s pensions could be payable at the following rates (expressed as a percentage of your pension); 1 child – 20%, 2 children – 30%, 3 children – 40% and 4 or more children – 50% divided equally. The pensions are paid until the children are aged 18 and doubled if there were no spouse.
  3. Children’s pensions may be paid at the trustees’ discretion.
If you are changing from an active member to a preserved member, it is possible that the amount of children’s pensions payable may change – and sometimes that change can be dramatic. It is essential that you investigate whether children’s and/or dependants’ pensions are available and whether and how they change, if you become a preserved member.
  
 
 
 
  
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Examples of the changes that can happen to children’s pensions when changing from an active member to a preserved member:
  1. A reduction in the percentage of the children’s pension (e.g. from a percentage of your pension to a percentage of your spouse’s pension – a subtle but important change).
  2. Children’s pensions only become payable to children that were born whilst you were an active member of the pension scheme.
  3. No children’s pensions at all.
 
 
Sample Case history
 
Paul is being made redundant.
He is a member of his defined benefit scheme.
He has 30 years pensionable service, 1/60th scheme basis.
His pensionable salary is £34,000 p.a.
 
His pension would currently be:      30 x £34,000 = £17,000 p.a.
                                                60
 
and his spouse’s pension would be 50% of that upon his death, i.e. £8,750.
 
In the scheme rules, it describes children’s pension payable on the death of an active member as being 50% of the member’s pension, divided equally, at the date of death.
 
However, for a preserved member there is a subtle change in that the scheme rules say the children’s pension is 50% of the spouse’s pension, divided equally, at the date of death.
 
So, the children’s pension (divided equally between his children) on Paul’s immediate death would be:
 
As an active member -
50% of his pension: 50% of £17,000 = £8,500 p.a.
 
As a preserved member –
50% of his spouse’s pension: 50% of £8,750 = £4,250 p.a.
 
His children’s pensions will reduce by half if Paul dies after becoming a preserved member.
 
 
Summary
 
This shows the type of change in the children’s or dependants’ benefit when changing scheme category from an active member to a preserved member.
 
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 Quicknote forms part of our Module about Redundancy and should be read alongside the other Factsheets and Quicknotes in the series.
 
This is not an authoritative document. Seek professional advice from an appropriately experienced and qualified adviser.
 
*We include civil partner wherever we mention spouse on this page
 
Redundancy Children's death benefits v1.5 Active
Last reviewed 10/08/2009 
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Redundancy: Children’s death benefits - Active Members
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