In the event of illness or worse, what pension benefits can you or your family draw on? David Binnie explains.

Help in testing times

While we all hope to live long and healthy lives and enjoy the pensions we have accrued in retirement it is important to understand the wider benefits available in your pension scheme.

Both the Teachers’ Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS) offer a range of ill health, death and family benefits. These may not be the most comfortable matters to deal with but due consideration now could save delays, loss and upset at a more testing time in the future.

Ill-health benefits

The TPS has two levels of award. Partial incapacity means that one is fit to work but not as a teacher. The pension accrued to date is paid with no actuarial adjustment.

Total incapacity means that one cannot work again in any capacity. The pension accrued to date is enhanced by half the time left to the normal retirement age and paid with no actuarial reduction.

The LGPS has three levels of award. If one is likely to be capable of employment within three years (or before the age of 65 if turning 65 is sooner) the pension accrued to date is paid for three years.

If one is unlikely to be capable of employment within three years but may be capable of employment before the age of 65, the pension is paid plus 25 per cent of the time to normal retirement.

If you have no reasonable prospect of being capable of employment before 65 then the pension is paid as if one had worked to 65.

It is strongly recommended that you do not make an ill-health application without ASCL support. In the TPS, for example, fewer than 40 per cent of applications are successful so professional help is vital.

If you feel that such an application may be necessary, contact the hotline. A regional or field officer will be allocated to support you and the pension specialist will provide technical support. ASCL will also be able to assess the likely outcome of an application, which helps to avoid inappropriate applications being made with the accompanying expectation and disappointment. You will be advised on the quality and range of medical evidence required and alternative solutions to your situation can also be explored with you.

In the TPS an application is made to the scheme and is judged by a panel of occupational health doctors. In the LGPS the application is dealt with by occupational health in the local scheme area. Unsuccessful applications can be appealed.

Death benefits and family benefits

These consist of lump sum death grants, ongoing pensions for one’s spouse and pensions for children.

The TPS provides a ‘death in service’ grant of three times’ salary plus a short-term grant of three months’ salary.

Death out of service receives the lump sum attached to the pension as a death grant. If one dies within five years of retirement then the balance of five years’ worth of pension is paid as a supplementary death grant.

A spouse receives a pension of half the pension holder’s. Children under 17 (under 23 in full-time education) receive a quarter of the pension holder’s pension (maximum equivalent to two children).

The LGPS provides benefits similar to the TPS, including ‘death in service’ grants of three years’ pay, spouse’s pensions and children’s pensions. Short-term pensions are paid on death and then the full benefits are paid.

The exact benefits (including death out of service or in retirement) depend upon when you were in service (pre- or post-1988) and these, together with children’s benefits, need to be checked with the local scheme provider.

There are important points applicable to both schemes that must be addressed.

If one is not in a traditional legal marriage or a civil partnership it is vital that nominations are made for both death and family benefits (guidance is available on the scheme websites).

It is also wise to make a will and seek professional advice over lasting powers of attorney (to enable others to manage your affairs if you become incapacitated).

It should also be noted that when these benefits arise from a woman’s pension they are only available on contributions from 1988. This also applies to civil partnerships. Unmarried couples (if nominated) have benefits on contributions from 2007.

It is advisable to keep a file with all the relevant documentation and to tell the relevant people where it is kept. It should be kept up to date and it should include a signed letter (including pension reference number, National Insurance number and date of birth for identification purposes) giving a named person authority to act on your behalf in connection with your pension.

Both schemes are carrying forward these benefits into the reformed schemes, although the precise way in which they are calculated may vary in the CARE (Career Average Revalued Earnings) schemes.

There are full details on the schemes’ websites. For further guidance search ‘pensions’ on the ASCL website: www.asc.org.uk

• David Binnie is ASCL’s Pensions Specialist

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