State Pension spouse entitlements

Barry_Bear

The Pensions Advisory Service website says that when you die some of your State Pension entitlements may pass to your widow, widower or surviving civil partner. The website promises "no jargon" but then gives this explanation "When both partners reach State Pension age after 6 April 2016, a surviving spouse or civil partner will be able to inherit 50% of any protected payment that exists" - with no explanation as to what a "protected payment" means in jargon free speak.
 
Can anyone explain in simple terms what happens if you qualify for a full State Pension (35 years contributions) after 6 April 2016 and:
1. you die before either you or your spouse reach State Pension age?
2. you die after reaching SP age but your spouse has not yet reached their SP age? 
3. you die after both are over SP age?
4. With 2 & 3 what difference does it make if the deceased was over SP age but had deferred (not started drawing) their SP?

Hoping for some jargon free clarity! Thank you.

Dazed_and_C0nfused

I don't know anything about inherited State Pension but I do know this,

Can anyone explain in simple terms what happens if you qualify for a full State Pension (35 years contributions) after 6 April 2016 and:

35 years contributions does not guarantee a full State Pension after 2016.

It will eventually but for the moment most people fall under transitional rules where 35 years has little relevance.

molerat

A  "protected payment" is anything over the full new pension - anything currently above £175.20 - which would have been earned under the pre 2016 system. If both are under the post 2016 system and receiving £175.20 or less there is nothing to inherit. Any inherited amount, half the protected payment amount, is only payable at the recipients SP date and is paid irrespective of the donor dying pre or post retirement.

If you die before reaching SP age, tough - the system wins - except for the inherited protected payment amount as above but if the recipient dies before reaching SP age go back to the beginning of this comment.

With deferral under the post 2016 system the estate receives up to 3 months of backdated pension payments, there is no inheritance of deferred amounts again except for half the protected payment amount as a weekly payment.

If you re marry before reaching SP you lose any inherited payment.

xylophone

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181235/derived-inherited-entitlement.pdf
The NSP was £155.65 at introduction.

https://www.gov.uk/new-state-pension/how-its-calculated#:~:text=The part of your starting,more to your State Pension.

Barry_Bear

xylophone said:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181235/derived-inherited-entitlement.pdf
The NSP was £155.65 at introduction.

https://www.gov.uk/new-state-pension/how-its-calculated#:~:text=The part of your starting,more to your State Pension.

Thanks. I have read this but still no clearer on which of all these scenarios and types of pension apply.

I have checked my SP online and have 35 years NI and it says the amount I am forecast to get in a few years time at age 67 is the most I can get. The amount was from memory £175 or about.

In short I can't find a simple answer as to spouse entitlements for this situation either right now, or after reaching SP age.

xylophone

In short I can't find a simple answer as to spouse entitlements for this situation either right now, or after reaching SP age.

You and your spouse were both under SPA on 6/4/16 when the new system was introduced.

The full NSP was set at £155.65 at that point.

See this https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

but update figures as above.

Then see page 15 of first link in my post above.

See also https://www.thisismoney.co.uk/money/pensions/article-4565554/If-delay-state-pension-die-heirs-lose-out.html

Barry_Bear

Thanks for the links. I've read through them all and some of it seems contradictory, or maybe it's the jargon and terminology that makes it confusing. When I refer to the State Pension, I mean the basic amount pensioners get if they pay the maximum necessary qualifying years of NI contributions during their working life to get the maximum "normal" state pension. I'm not referring to a SIPP or any private pensions which are totally separate.

From the information and links I deduce the following:

I was born after 1951 so will get the "single-tier" pension.
A "White Paper" says the full single-tier pension will be £144 per week.
I will reach State Pension age after April 2016 so my state pension will be based on the "single-tier" scheme.
Therefore my State Pension will be £144 p.w.

But my online State Pension forecast says something totally different:

NI record: 35 years of full contributions and 10 years to contribute before 5 April 2030

Estimate based on your National Insurance record up to 5 April 2020 £159.73 a week

Forecast if you contribute another 4 years before 5 April 2030 £175.20 a week

So which figure is true, the fact sheets or my forecast provided by GOV.UK? Why would GOV.UK exaggerate the forecast amount of my Pension if they are really only going to pay £144 p.w.?

Here https://www.gov.uk/new-state-pension/how-its-calculated it says:
The new full State Pension is £175.20 per week and requires 35 Qualifying Years of NI to receive this amount.

The whole thing seems inconsistent and if I can't rely on the figures on my State Pension forecast, where can I get a figure I can trust?

On the link to thisismoney.co.uk the expert says: "I have checked the information on the gov.uk website about state pension age deferral  and I can find no reference to what happens if you die before claiming your pension under these new rules. I agree with you that this is a gap and needs correcting."

So it appears no-one knows yet whether there is a spouse entitlement if you die before reaching your State Pension age. 

With regard spouse entitlement after you reach State Pension age the fact sheet says " A Dependant will be able to inherit 50% of the Contributor’s Protected Payment." 

So maybe that means a surviving spouse gets 50% of the deceased's State Pension?

Silvertabby

The White Paper was written some years ago, when the single tier pension was set at £144 per week.

Since then, the annual cost of living increases/triple lock  have pushed up the single tier rate to £175.20 per week.  This figure will continue to increase, and so will be higher still by the time you reach SPA in 2030.

Many people don't seem to appreciate that the annual cost of living/triple lock increases don't just benefit those already in receipt of their State pensions - they benefit all of us, including those as young as their teens, by increasing their eventual State pensions.

Dazed_and_C0nfused

£144 was the amount when the White Paper was written but there have been several years of inflation increases since then.

You are under transitional rules so 35 years are irrelevant to you.

You have accrued £159.73 to the end of the last full tax year.

If you qualify for additional years, usually by paying sufficient NI, then each of the next 3 years going forward will add £5.00 to take you to £174.73

A fourth extra year will add £0.47 to take you to £175.20, the maximum you can reach.

xylophone

The figures given by the OP indicate that his "starting amount"  at 6/4/16 ( this term fully explained in links given which he says that he has read) was under the amount of a full state pension.

Therefore he did not have any "protected payment". This term is also explained in the links.

Assuming that he continues to contribute/is credited for 20/21 - 23/24, he will reach the full NSP and will receive the full NSP at whatever level that has reached when he gets to his State Pension Age.

His attention was drawn to page 15  here  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181235/derived-inherited-entitlement.pdf

which shows the situation when both parties to the marriage  reach SPA under the new state pension system.

Barry_Bear

Thank you all. That helps a lot. So by paying 3 or 4 more years NI the pension will be around £175 and may increase further with the triple lock. So the GOV.UK forecast is accurate. Good!

xylophone thank you again, reading it again I now see that the "Protected Payment" is the additional sum above the £144 pension. The information on p15 says that 50% of the protected payment is inheritable. So basically of the £175 pw state pension £31 pw (£175 - £144) can be claimed by a surviving spouse. Not ideal but better than nothing I suppose.