Qualified Financial Adviser (QFA) Pensions Exam 1 Practice Test

Which statement best describes death-in-service cover in a pension scheme?

A benefit paid to a beneficiary if the member dies while still employed, often a multiple of salary. A pension paid to the member after retirement. A lump-sum paid only if death occurs after retirement. Life cover that starts at retirement.

Correct Answer:

A benefit paid to a beneficiary if the member dies while still employed, often a multiple of salary.

Explanation:

Death-in-service cover is a form of life assurance linked to a pension scheme that pays a benefit if the member dies while still employed. The benefit is typically a lump sum for the dependants and is often calculated as a multiple of salary (for example, 4x or 5x). This protection is intended to provide financial support to loved ones during the member’s working years, not as a pension to the member after retirement. It is not a pension paid after retirement, nor a lump sum only if death occurs after retirement, nor life cover that starts at retirement. If someone earns £60,000 and the cover is 4x, the lump sum could be around £240,000, payable if they die in service.

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