Thursday, September 29 2022

The old state pension system allowed widows to inherit everything – even if their husband died before they could collect their pension. But in 2016 reforms were introduced that meant widows could no longer automatically inherit a state pension from their late husband or wife. Up to £145,000 can be paid in National Insurance contributions to reach full state pension on retirement, but these cannot be passed on if the person dies before reaching retirement age 66 years old.

Alison Wright, 66, from Fife in Scotland, was stunned to find her husband’s 40 years of contributions gone when she realized she would receive nothing when he died a year before reaching the age legal retirement.

She said: ‘He paid for all these years and saw none of this. I couldn’t believe I wasn’t going to win anything either – we’ve been married since 1978.”

Ms Wright’s husband would have started collecting the state pension next month and, under the rules before the 2016 upheaval, she could have claimed part of his state pension to supplement her earnings.

She added: “The rules have changed so much and it’s hard to plan. It seems so unfair.

The latest figures from the Office for National Statistics show that some 60,000 people die each year between the ages of 45 and 64.

Kirsty Stone of financial adviser The Private Office calculated that someone earning £40,000 a year would pay £145,360 in National Insurance contributions over a 40-year career.

They would retire with £460,935 if those payments were invested in the stock market, earning five per cent a year.

She warned: ‘It’s a stark difference.

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“Families may incorrectly assume that they will receive part or all of their late partner’s state pension and could face a financial shock at a time when they are already dealing with the stress of a family bereavement. “

Pension experts say the current rules in place are extremely harsh, with many women disappointed as they relied on their husbands’ work history for their retirement.

Mel Wright, of Rest Less, an online community for the over 50s, said: “Losing your partner is devastating enough.

“But finding out that you are entitled to none or a tiny part of their state pension, especially if they have paid into National Insurance throughout their working life, can be a blow to those who are already struggling to make ends meet.”

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Former pensions minister Sir Steve Webb, who was behind the state’s new pension rules, said the old system was designed on the assumption that married women would spend their lives depending on financially from their husband.

But the new rules are aimed at “202 and beyond”, where men and women now have the opportunity to accrue a full state pension.

He added: “It can be difficult if someone has contributed all their life and cannot use that money, but the change means the vast majority of women will receive a higher state pension throughout their retirement. .”

A spokesperson for the Department for Work and Pensions said: ‘The new state pension system is improving outcomes for millions of women, with payments set to equalize between men and women a decade earlier than the previous system.

“The pension credit is available to those who qualify and provides a safety net for those who need it most.”

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