If anything is going to test your feelings of mortality, it is a global pandemic. Being asked to stay home because the slightest social contact could cause someone to fall seriously ill or even die is an eye-opener. Many people likely asked whether their family would have been ok if the worst had happened to them.
There are benefits within your Teachers’ Pension Scheme that should give you some peace of mind. Here we explore the death benefits and what these might mean for your dependents.
The lump sum
If you die before retirement, a lump sum is paid in your estate.
If you are in the Career Average arrangement, this lump sum is three times your final full-time equivalent salary at the time of your death.
If you are in the Final Salary arrangement, your estate will receive three times your final average salary, which is the best three consecutive years in the last 10.
If you are teaching in retirement and paying into the scheme as part of Additional Service after Retirement (ASAR), your previous lump sum will be deducted from this death grant.
What if I am no longer a teacher but not yet retired?
Your death grant will depend on your arrangement if you have left teaching and have more than two years of pensionable service accrued.
If you are in the Final Salary arrangement, an adult pension is payable at 3/80ths of your final average salary multiplied by your years of service. If there is no adult pension payable, your estate will receive either the calculation above or your pension contributions plus interest of 3%.
If you are in the Career Average arrangement, the surviving adult pension is payable at your accrued pension multiplied by 2.25. Again, if there is no adult pension payable, you will receive either the calculation above or your pension contributions plus interest of 3%.
If you have less than two years of teaching, your estate will receive your contributions plus 3%.
Note: if you have reached your pension age, a posthumous award of five times your annual pension is payable rather than an out of service death grant.
What about a survivor’s pension?
A survivor’s pension can be paid to your spouse, your registered civil partner, your children if under 23 and in education, a child that is incapacitated and financially dependent on you.
It could be possible to increase the value of these benefits in the event of your death. You can purchase additional pension, additional years or apply for AVCs. You may want to discuss securing the future of your loved ones with an independent financial advisor.
The content in this article was correct on 28th March 2021. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on your Teachers’ Pension Scheme. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.