A member may elect to allocate a part of their annual pension for the provision of pension after their death to one or more individuals, each of whom is their spouse or civil partner or otherwise is financially dependent on, or interdependent with the member.
The rules specify a number of requirements to be met before an allocation can be put into effect. These include but are not limited to conditions relating to:
- the nature and timing of an election
- the eligibility of a potential beneficiary
- the total amount of pension which may be allocated
It is assumed that all relevant conditions and restrictions are satisfied before a calculation made in accordance with this guidance is put into effect. Procedures for checking relevant conditions are outside the scope of this guidance.
The calculations set out in this guidance are intended to be used as required under the rules to identify the amount of pension the beneficiary will receive after the member's subsequent death should the member give up a fixed amount of pension.
Allocation of pension does not affect an automatic surviving adult or eligible child pension payable on the member's death. If a person to whom an allocation is made is also a person who becomes entitled to an automatic pension on the member's death, the pension secured by allocation is payable in addition to the surviving adult or child's pension payable on death.
The following formula should be used to calculate the amount of pension payable to a beneficiary if the beneficiary survives the member:
AlP = P x Fxy
Where:
AlP is the annual pension payable to the beneficiary following the member's death.
P is the annual member's pension to be given up at the date of election.
Fxy is the relevant allocation factor for a member aged x and dependant aged y, taken from Tables P1ALC1 to P1ALC4 (Tables 805 to 808 in the consolidated factors workbook) based on the sex of the member and the dependant.
The appropriate factor for the member's age last birthday (across the top of the table) and the dependant's age last birthday (down the side of the table) should be used, where age in each case is taken as age in completed years at the date of allocation.
Pension increases are payable on the amount of pension actually in payment and so the part of pension surrendered on allocation will not qualify for such increases as part of the member's pension.
The pension secured for the beneficiary as a result of the allocation will, however, be subject to increases in its own right, and it will attract pension increases appropriate to a pension beginning on the same date as the allocation was made.
