For widows and widowers, dealing with personal finances is often the last thing you want to do – but understanding your pension rights is key to finding stability and support.
Although it’s probably the last thing you want to think about when you’re grieving your partner, understanding your financial and pension rights, and what you can expect, will give you one less thing to worry about during a difficult time.
Of course, everyone’s situation is different and that’s why it is so important to talk to a pensions adviser. But here we’ve looked at the most common questions, such as ‘how much is a widow’s pension?’
Whether you qualify depends on a few things: you don’t qualify if you weren’t married or civil-partnered, your partner must have paid sufficient National Insurance contributions, and you can’t have been living with another partner when they died.
Bereavement support payment is paid to widows, widowers and surviving civil partners who were bereaved on or after 6 April 2017. It provides an initial lump sum and then 18 monthly instalments – and the amount depends on whether you’re left with dependent children.
However, you may be able to claim some of your partner’s pension provision after their death.
If your spouse has spent years contributing to a pension that they are not able to take advantage of, you naturally want the money to come to you and not go to the pension firm – but will it?
Carl Roberts, managing director at RTS Financial Planning, says that it depends on how a private pension is structured.
‘Most defined contribution pensions will ask you to complete a ‘nomination of beneficiaries’ form stating who you want to benefit from your pension on death,’ he explains.‘Providing the surviving partner is nominated, they will usually have the option of taking the entire pension as a lump sum, or taking regular smaller withdrawals.‘If your partner died before the age of 75, then it is most likely you will have no Income Tax to pay on any withdrawal from your late partner’s pension. If they died after 75 then Income Tax will be payable at your marginal rate.’
Rules around pensions changed two years ago when the new State Pension came in. Now, people who are married or in a civil partnership can no longer rely on their partner’s record to entitle them to a State Pension, or to increase the amount they receive.
In an article published by This is Money, Age UK strongly urged people approaching retirement under the new system to get a State Pension statement. Women who do not have a full National Insurance record, especially, are affected, as they would have missed years not working and contributing to their state pension.‘Many couples will have planned their retirement income in the expectation that the woman would receive the ‘married woman’s’ pension or a full basic pension if widowed,’ the charity was quoted as saying.
Before you can work out whether you’re entitled to your partner’s pension provision, you’ll need to know exactly what they had. That can be a pretty daunting thing, especially when you’ve just been through a bereavement, but it’s not as hard as you may think.
If your partner had been receiving a pension, then you need to inform the provider quickly that they have passed away. The sooner you do that, the faster you can progress your own claim. The Money Advice Service has a useful template letter you may find it easier to use.
However, if your partner had not started drawing their pension before they died then you’ll need to contact the pension provider for each different scheme that they belonged to.
If you’re not sure what they had, you can use the Pension Tracing Service to make sure you get all the support your partner would have wanted you to receive.
As for their State Pension, you can contact the Pension Service with any questions.
For people who unexpectedly lose partners before retirement, it often means a major financial shake-up. That could mean that if you hadn’t previously saved into a pension, you now need to question whether it’s become more important to do so.
Carl believes that seeking individual advice is important, but that pensions savings are normally a good decision.
‘Providing you can afford it, it’s always a good idea to pay into a pension,’ he says. ‘A pension is one of the most tax-efficient savings products we have available in the UK.
‘Not only do you benefit from Income Tax relief on all contributions you make into a pension, it is a fantastic way to plan for reducing your Inheritance Tax bill.
‘In the majority of cases, on your death your pension will not be included in the calculation of your estate for Inheritance Tax purposes, meaning you can pass on your pension to your loved ones Inheritance Tax free.’
Whether you’re planning for all eventualities or you’re managing your money after a loss, an online guide can only go so far. To fully understand your financial situation, you need to talk to a regulated financial adviser who can outline your circumstances and options. The more information you have, the more in control you can be.