Page 20 - Group Insurance and Retirement Benefit IC 83 E- Book

What happens if I die before retirement age?

Almost all pension schemes provide some sort of death in service benefit designed to
provide for the dependants of members who die before reaching pension age. These

death-in-service benefits take the following forms:

(i) Lump Sum Benefits
Lump sums are payable income tax free and are often expressed as a multiple of salary.

The maximum lump sum benefit which the Revenue Commissioners will allow is four

times your final pay. However, your own contributions can be refunded in lump sum
form in addition, with or without interest, if the rules allow that. This refund of

contributions would also be tax free. If the benefit provided in the form of a capital sum

exceeds the Revenue limits on cash payments, anything over the limits must be used to
provide a pension for a dependant or other beneficiary. Check the rules of your own

scheme.
(ii) Pensions for Dependants

Many schemes provide pensions for dependants in addition to lump sum benefits. These
pensions can take the form of spouses‘ benefits, spouses‘ and children‘s benefits, or

benefits payable to dependants generally. The total amount of these pensions is regulated

by the Revenue Commissioners and the total cannot exceed the maximum pension which
you could have had, based on your final pay and the service you would have completed if

you had lived to normal retirement age.

(iii) Preserved Benefits
If you have left employment since the 1st January 1993 and are entitled to preserved

benefits under the Pensions Act, the value of these benefits must be paid to your estate in

the event of your death. Alternatively, the trustees of your Pension Scheme may have
chosen the option to pay a dependant‘s pension instead. The notification of your benefits

on leaving service must specify what is payable in the event of your death, and in what

manner. Beneficiaries may be liable to Inheritance Tax on these benefits.