Death benefits

Provision of death benefits through registered occupational pension schemes

An important facet of most, if not all, retirement benefit schemes is their ability to provide survivors’ benefits payable in the event of death, as well as benefits in the event of retirement due to old age or ill health. Most registered occupational pension schemes (both defined benefit and money purchase) provide death benefits if a member dies while in active service with the sponsoring employer, during a period of deferment or while in receipt of a pension.

The particular form of death benefits provided by an occupational pension scheme will depend on:

  1. the type of scheme (eg defined benefit or money purchase)

  2. the member’s status at death (ie active, deferred, pensioner), and

  3. what death benefits HMRC permits as an authorised payment. If a death benefit is an unauthorised payment, it will be subject to punitive tax charges

Some of those death benefits (typically lump sums, and possibly spouses’ and dependants’ pensions) may be insured, with the insurance policy or policies being held in the name of the scheme trustee and constituting a scheme asset.

For

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PASA response to FCA’s targeted support consultation calls for industry collaboration on practical solutions

The Pensions Administration Standards Association (PASA) has responded to the FCA’s consultation on targeted support for pension savers, welcoming the initiative but highlighting challenges for occupational schemes. Given that occupational schemes lie outside FCA regulation it makes segmentation complex. PASA stresses the need for tailored segmentation. It urges the FCA to acknowledge scheme diversity and avoid retail-based assumptions, while continuing collaboration with the Department for Work and Pensions. PASA also stresses that schemes may not hold the same data as FCA regulated providers, limiting their ability to deliver targeted support without disproportionate effort, and recommends a flexible framework that reflects operational realities. It also cautions against the risk of misleading guidance for consumers with hybrid pension schemes where defined benefit elements are significant, as guidance that overlooks them can be misleading for savers. PASA also calls for clear boundaries between ‘guidance’, ‘regulated advice’ and any new support strand to avoid regulatory risk. While supporting the development of proportionate and accessible decision-making tools, PASA emphasises the importance of clarity, confidence and collaboration with industry bodies to co-design practical solutions that are actionable and easy to understand, particularly for savers with limited financial literacy.

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