State pension rule change could lead to unexpected financial shock in retirement

The right to claim money on the grounds of a deceased spouse’s pension has largely been abolished.

Married pensioners could see their pension fall by two-thirds in the event of their spouses’ death, according to new analysis from Royal London.

Changes made to the state pension in 2016 have meant that the right to claim money on the grounds of a deceased spouse’s pension has largely been abolished.

Under the old pre-2016 rules, pensioners were entitled to increase their state pension based on the National Insurance record of a deceased spouse.

However, under the new rules that right has, in most cases, been lost. As Steve Webb, director of policy at Royal London, notes: “Under the new state pension system, widows and widowers will inherit little, if anything of their late spouse’s pension and income from an annuity often ceases when the recipient dies.”

In some cases, Royal London estimates that this could see a pensioner’s household income fall by between half and two-thirds. Webb adds: “As well as the emotional impact of bereavement, losing a spouse in later life can have a huge impact on living standards.”   

Indeed, various outgoing expenses for a pensioner are unlikely to see reduce significantly after the death of a spouse. For instance, food, water and energy bills may fall slightly, but not likely by half. Meanwhile, the amount required for rent or to pay off a mortgage will stay the same unless the pensioner in questions opts to “downsize.” Council tax for the pensioner will see just a 25% “single person discount”.

Royal London notes: “Very few major spending areas will fall by as much as the fall in income. As a result, the household finances are likely to be under greater pressure.”

What can you do?

Royal London lists three recommendations for pensioners potentially dealing with this squeeze to their finances.

1) First, find out where you stand – check how much of any occupational or private pension income would be passed on when one partner dies; if you are unsure about your rights from the state pension, the government website goes through the options:

2) Second, be careful with your finances earlier in retirement – if it is possible to build up a savings buffer earlier in retirement this will help the surviving widow/widower to cope with the financial shock of bereavement;

3) Finally, find a financial product that would pay out if one partner were to die – various products such as life assurance/term assurance might be worth considering for peace of mind if one partner were to die.


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Discuste how do they expect people to live and pay bills it's ok for the rich.

Pension Changes

But for those who are single it has always been the case that they get only one pension but have household expenses very little lower than those of a couple.

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