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Inheriting the State Pension

Technical Article

On 6 April 2016 we saw the move to the new flat rate state pension, which meant significant changes for those reaching state pension age. Some people would need to make up contributions to 35 years where they previously thought 30 would be enough and some will not receive anything because they have less than 10 years credits.

 

However the biggest changes are what happens on death and this has come as more of a surprise, usually at a time when things are difficult enough. What can actually be inherited is then determined by when the client reaches their state pension age, the type of benefit and when they were married.

Protected pension amount

The protected pension amount is calculated on 6 April 2016 and it is basically the difference between what the client would have been entitled to under the old state pension rules and the new flat rate rules. If the old rules gave them a higher amount this difference is the protected pension amount.

For those that reach state pension age after 6 April 2016 but were married before this date their spouse or civil partner can inherit 50% of this amount. The payments made with their own state pension. I have only seen a few of these protected pension amounts and none have been that significant. Should the spouse remarry this amount will also cease.

Extra state pension and/or lump sum

If the client reached state pension age before 6 April 2016 and had deferred their state pension then their surviving spouse or civil partner will be able to inherit some of this, either in the form of a lump sum or an increase to their pension. In this case the clients didn’t need to be married at a certain date, just at the point of death.

Additional state pension

Additional state pension may be applicable to:

  • men born before 6 April 1951
  • women born before 6 April 1953

It is an extra amount paid in addition to the basic state pension. If the client reached state pension age before 6 April 2016 then their surviving spouse would be able to inherit up to 50% of the state second pension entitlement and somewhere between 50 and 100% of SERPS depending on when the client was born.

National insurance record

Under the new state pension benefits are based solely on the individual national insurance record. It is no longer possible for the death of the husband to increase the credits of their surviving spouse.

Conclusions

As you can see the new state pension doesn’t offer very much on the death of a spouse or civil partner so for those that may have thought that they would continue to receive something in the event of death then other plans may need to be put in place.