Category: Group life · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-10
A dependants’ pension is a regular income payable to a dependant of a deceased member of a pension scheme. The most common dependant categories under HMRC rules are a spouse or civil partner, a financially dependent child under age 23, or a person otherwise financially dependent on the deceased. Dependants’ pensions are taxable on the recipient as PAYE income.
Category: Group life Also known as: Dependants’ annuity Tax treatment: PAYE on recipient Related concepts: Spouse’s pension, Death in service benefit, Group life insurance lump sum
Dependants’ pensions are paid either by direct purchase from an insurer (a “scheme pension”) or by drawdown from the deceased’s pension fund. Where the deceased was a member of a DB scheme, the dependants’ pension is typically calculated as a fraction (commonly 50%) of the deceased’s accrued pension or expected pension at normal retirement age.
Dependants are defined for HMRC purposes in Schedule 28 of the Finance Act 2004. Dependants’ pensions paid before the member’s death age 75 are taxable on the recipient as PAYE income; the same applies after age 75. Dependants’ pensions from a scheme pension or annuity are reported on form P60 to the recipient.
Group life schemes can include a dependants’ pension component in addition to the lump sum, although in modern practice the lump sum is the dominant component and the dependants’ pension is more often funded through the occupational pension scheme rather than the group life policy.
A DB scheme member dies in service with an accrued pension of £20,000 and a salary of £60,000. The scheme pays a 4× salary lump sum (£240,000) and a 50% spouse’s pension based on the deceased’s prospective pension at retirement. The spouse receives the lump sum tax free (assuming within LSDBA) and the indexed dependants’ pension as PAYE income.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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