Recently widowed? You could lose £85,000

Changes to the amount the state pays on the death of a partner could see families £85,000 worse off. From April 2017 the Bereavement Support Payment replaces the threetier system of Bereavement Payment, Bereavement Allowance and Widowed Parent’s Allowance. The Government branded the old model “unfair and complex”.

Yet under the new rules families could be thousands of pounds worse off, warned Royal London, the insurance company. From April widows will receive a lump sum of £3,500 if they have children or £2,500 for those without. Previously the sum was £2,000. Surviving spouses or civil partners will then receive 18 payments of £350 a month for those with children, or £100 for those without.

The payments will be available to anyone who is widowed before their state pension age, at which point payments cease. Payments do not count towards means-tested benefits and are tax free. Currently, the Bereavement Allowance is only for those over 45 at the time of their partner’s death.

Under the old system the Widowed Parent’s Allowance, which is based on the deceased’s National Insurance record, pays out up to £112.55 a week until child credit ceases to be paid (until the child is at least 16 or older if they are in certain types of education).

In an example provided by Royal London, someone widowed when their child was a baby – and who never remarried or had a civil partner – would have received around £96,000 over 16 years. Under the new system, the same person would get just £9,800 – a shortfall of around £85,000.

Steve Webb, director of policy at Royal London, said the changes failed to reflect the growth of unmarried cohabiting couples. Surviving unmarried partners will not receive anything, no matter the deceased’s National Insurance record.