PTM071200 - Death benefits: essential principles: definition of dependant
As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on The National Archives.
If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives.
Glossary |
Following the death of a member a pension may be paid to a dependant. Where the member has more than one dependant when they die a pension may be paid to each dependant, either at the same time or at various times. Who may be paid a pension, and when will depend on the terms of the pension scheme or annuity contract.
Meaning of ‘dependant’
Dependants’ pensions from schemes in existence on 5 April 2006
Commencement of a dependants’ pension
Meaning of ‘dependant’
Paragraph 15 Schedule 28 Finance Act 2004
Paragraph 15 Schedule 28 Finance Act 2004 provides the definition of a dependant for the purposes of the tax legislation. Pension schemes may have their own definition of who can be a dependant, but it is the definition under the tax legislation that is important in establishing if a payment is authorised or unauthorised.
Where the member has more than one dependant when they die, each of those dependants may be provided with a pension death benefit.
The following people are a dependant of the member.
Spouse or civil partner
An individual married to, or a civil partner of, the member on the date the member died is a dependant.
If the rules of the pension scheme provide for it, an individual married to, or a civil partner of, the member when they first became entitled to a pension under the scheme is also a dependant.
Child of the member
The term child of a member includes someone who has been legally adopted by the member.
A child aged under 23 is a dependant. When that child reaches age 23 they will stop being a dependant unless they qualify to be a dependant under one of the following provisions:
- A child of the member aged 23 or older is a dependant if, in the scheme administrator’s opinion, they were at the date of the member’s death dependent on the member due to physical or mental impairment.
- A child aged 23 or older may also be a dependant if they are covered by any of the transitional provisions listed under the section Dependants’ pensions from schemes in existence on 5 April 2006.
Paragraphs 15(2A) and (2B) Schedule 28 Finance Act 2004 and paragraphs 6(4) and 6(5) Schedule 5 Finance Act 2016
In limited circumstances relating to payments made after 15 September 2016 the definition of a dependant is extended to include any child of the member aged 23 or older.
The extended definition of a child dependant ONLY applies for the following purposes:
- determining if a payment is a dependants’ short-term annuity if the annuity was purchased after 15 September 2016, and
- determining if a payment is a dependants’ income withdrawal if the child’s 23 birthday was after 15 September 2016.
The extended definition does NOT apply for determining who can be paid a dependants’ scheme pension or a dependants’ annuity, who a dependant is for the purpose of the definition of a nominee, or who a dependant is for the purpose of the conditions for paying a charity lump sum death benefit.
Others
Someone who wasn’t married to or a civil partner of the member when they died, and is not a child of the member, is a dependant if, in the scheme administrator’s opinion, on the date the member died they were:
- dependent on the member due to physical or mental impairment,
- financially dependent on the member, or
- in a financial relationship with the member which was one of mutual dependence. This will need some element of reliance on each other financially. It is for scheme rules to set out the criteria to be used by the scheme to determine dependency in these circumstances.
Dependants’ pensions from schemes in existence on 5 April 2006
Before 6 April 2006 some pension schemes provided for a dependants’ pension to be paid to a child aged 23 or older. There are transitional provisions that extend the definition of a dependant in respect of a pension scheme that automatically became a registered pension scheme on 6 April 2006 (see PTM031300) to include children aged 23 or older in the following circumstances:
- whilst the child is continuing in full-time education or vocational training,
- if the child is suffering from certain health implications, or
- if the child was financially dependent on the member (parent) or the financial relationship with that parent was one of mutual dependence.
The sub-sections below provide guidance on the conditions to be satisfied before the definition of a dependant for these schemes is extended to include children aged 23 or older, and the scope of the transitional provision.
These transitional provisions cover payments of dependants’ pension to a child from only:
- a pension scheme that automatically became a registered pension scheme on 6 April 2006. or
- a ‘qualifying transferee scheme’ that has received a ‘relevant block transfer’ that continues the rights that originally existed under the pre-6 April 2006 scheme.
The sub-section ‘Qualifying transferee scheme’ below explains what a ‘qualifying transferee scheme’ and a ‘relevant block transfer’ are.
Child in full time education or vocational training
Articles 34 and 34B The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572
The definition of a dependant is extended to include a child aged 23 or older whilst they are in full time education or undertaking vocational training.
For a pension paid from a pre 6 April 2006 scheme that automatically became a registered pension scheme, to qualify for this transitional provision at least one of the following apply:
1. On 10 December 2003 the pension scheme rules allowed the member to irrevocably elect to designate part of their pension rights as available to pay a pension to their child after they died until that child ceasing full-time education or vocational training, and the scheme administrator had accepted such an election from the member before 6 April 2006.
OR
2. On 5 April 2006 the pension scheme rules allowed a pension to be paid to a child following the member’s death until a time no later than that child ceasing full-time education or vocational training, and one of the following applied:
- the member had died before 6 April 2016 and either the dependant’s pension was in payment to the child on 5 April 2006 or was due to come into payment
- the member’s pension was in payment on 5 April 2006, and the child was born before 6 April 2007.
For this transitional provision to continue to apply under a ‘qualifying transferee scheme’ (see sub-section below) the qualifying criteria set out above:
- must have been met under the transferring scheme (the original pre-6 April 2006 scheme, or previous ‘qualifying transferee scheme’ where there has been a chain of ‘relevant block transfers’), or
- would have been met under the pre-6 April 2006 scheme if the benefits had not been transferred on or after 6 April 2006.
When the child ceases full-time education or vocational training, they stop being a dependant (unless the child is suffering from a physical or mental health impairment and satisfy the conditions to be a dependant set out in the next sub-section of guidance).
Schemes may choose to stop paying a child’s dependants’ pension before the child finishes full-time education or vocational training.
Child has physical or mental health impairment
Articles 34 and 34B The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572
The definition of a dependant is extended to include a child aged 23 or older if:
- on reaching age 23, or
- if later, on ceasing full time education or undertaking vocational training
in the scheme administrator’s opinion that child is suffering from physical or mental deterioration that was serious enough to prevent the child from following a normal employment, or which would seriously impair their earning capacity.
The qualifying criteria for a pre 6 April 2006 to use this transitional provision are the same as the qualifying criteria for a child in education and training – see previous section.
For this transitional provision to continue to apply under a ‘qualifying transferee scheme’ (see sub-section below) the conditions set out above:
- must have been satisfied under the transferring scheme (the original pre-6 April 2006 scheme, or previous ‘qualifying transferee scheme’ where there has been a chain of ‘relevant block transfers’), or
- would have been satisfied under the pre 6 April 2006 scheme if the benefits had not been transferred on or after 6 April 2006.
Financially-dependent children
Articles 34A and 34B The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572
Before 6 April 2006 some pension schemes provided for a dependants’ pension to be paid to a child aged 23 or older, if when the member died the child was financially dependent on the member. The definition of a dependant is extended to include a child aged 23 or older if at the date of the member’s death:
- the child was financially dependent on the member, or
- the financial relationship with the member was one of mutual dependence. This will need some element of reliance on each other financially. It is for scheme rules to set out the criteria to be used by the scheme to determine dependency in these circumstances.
To qualify for this transitional provision the scheme rules condition must be satisfied, and at least one of the following conditions applied:
- the member’s pension was in payment on or before 1 July 2008
- the child’s dependants’ pension was in payment on 1 July 2008
- the child had become entitled to a dependants’ pension before 1 July 2008.or
- where the entitlement to a dependants’ pension was subject to the discretion of the scheme trustees, the trustees were capable of exercising that direction in favour of the child so that the child’s entitlement to a dependants’ pension could have arisen before 1 July 2008.
The scheme rules condition is that on 5 April 2006 the scheme rules allowed a pension to be paid to a child of the member following the member’s death if, when the member died, that child:
- was financially dependent on the member, or
- their financial relationship was one of mutual dependence.
For this transitional provision to continue to apply under a ‘qualifying transferee scheme’ (see sub-section below) the conditions set out above:
- must have been satisfied under the transferring scheme (the original pre-6 April 2006 scheme, or previous ‘qualifying transferee scheme’ where there has been a chain of ‘relevant block transfers’), or
- would have been satisfied under the pre 6 April 2006 scheme if the benefits had not been transferred on or after the ‘relevant date’.
Where the child dependants’ pension may be paid after the child’s 23 birthday because the member’s pension was in payment on or before 1 July 2008 (condition 1 above) the ‘relevant date’ is the later of:
- 6 April 2006,
- the date on which the member’s pension came into payment.
Otherwise the ‘relevant date’ is the later of 6 April 2006 and the date of the member’s death.
Qualifying transferee scheme
Article 34B The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572
The transitional protections described above are specific to the pre 6-April 2006 scheme under which the ability to pay a dependants’ pension to a child aged 23 or older existed. However, pension benefit rights may sometimes transfer to another scheme. This could be either as a transfer of the member’s rights before their death, or as a transfer of the dependant’s entitlement that arose on or after the death of the member. In either case, the transitional protections described above will not apply in the receiving scheme unless certain conditions are met, and the scheme is a ‘qualifying transferee scheme’.
A pension scheme is a ‘qualifying transferee scheme' if there has been a ‘relevant block transfer’ made to the scheme on or after 6 April 2006.
A transfer is a ‘relevant block transfer’ if it is a ‘block transfer’ from a pension scheme that automatically became a registered pension scheme on 6 April 2006 (see PTM031300), and as a result of the transfer:
- where transfer relates to a transfer of the member’s (the parent’s) rights the parent becomes a member of the receiving scheme,
- the child becomes entitled to receive a dependants’ pension under the receiving scheme, or
- where the member had made an irrevocable election designating part of their pension rights as available for the payment of a pension to the child, the child is entitled to payment of that pension from the receiving scheme
A transfer is also a ‘relevant block transfer’ if it is a ‘block transfer’ from another qualifying transferee scheme for the member and as a result of the transfer any of the conditions listed in the previous three bullet points are met. This allows the member and child dependant to continue to be covered by the transitional provisions where there has been a chain of ‘relevant block transfers’ relating to their pension rights.
PTM062240 provides guidance on the meaning of a block transfer.
Commencement of a dependants’ pension
A dependants’ pension does not have to come into payment with effect from the date of the member’s death. The payment may be deferred to start from a later date. For example, if payments are being made under pension guarantee (see PTM071500) the scheme may choose to start paying the dependants’ pension after the end of the guarantee period. Alternatively, scheme trustees or provider may decide the dependant is still too young to receive a pension.
Whether or not a dependant’s pension entitlement can be deferred in this way, and for how long, will depend on the terms of the scheme rules, or the wording of the relevant annuity contract.