A retirement benefit obligation (ODV) works differently from a pension entitlement, even if the person entitled to the benefits dies.
Survivors’ pension
When a pensioner dies, the surviving dependants named in the pension statement receive a widow’s/widower’s or orphan’s benefit. The basic principle is that the pensioner’s partner receives a benefit amounting to 70% of the pension entitlements accrued by the pensioner. In most cases, this benefit is paid for life.
Unfortunately, in modern pension schemes, the 70% described above is often far from being met. In fact, there may be no survivor’s benefit at all. It is therefore important to keep a close eye on this.
If a survivor’s benefit is payable, it must commence immediately following the death of the pension holder. It is usually fairly straightforward to determine who is entitled to a survivor’s benefit. After all, this is set out in the pension statement or other records of pension entitlements.
Retirement liability
When a person entitled to a retirement benefit (ODV) dies, the entitlement must be paid to one (or more) heir(s) of that person. If the beneficiary dies before payments from the ODV have commenced, payments to the heir or heirs must commence within 12 months of the death. However, if the beneficiary was already receiving payments from the ODV, these payments must commence immediately following the death.
However, it is by no means always straightforward to determine who the heirs are. This may, for example, require some investigation, and heirs may renounce the estate (or accept it under benefit of inventory). With this in mind, the Tax and Customs Administration has approved, in a question-and-answer decision, that the payment of survivors’ benefits from an ODV be suspended until such time as the heirs are known. Immediately thereafter, any instalments that have already fallen due must be paid out in a single lump sum.
Pre-sorting
The conversion of pension entitlements held in-house into an ODV means it is advisable to make arrangements in advance in the event of the death of the person entitled to the ODV. Their will can be used to determine who the heir is. In addition, it is possible to specify who will inherit the payments from the ODV.