The old state pension system saw widows inherit everything, even if their husbands died before they could collect their pension. But reforms were introduced in 2016 that meant widows could no longer automatically inherit any state pension from their late husband or wife. Up to £145,000 in National Insurance contributions can be paid to reach the full State Pension in retirement, but these cannot be passed on if the person dies before the age of 66.
Alison Wright, 66, from Fife in Scotland, was shocked to discover her husband’s 40 years of contributions were gone when she realized she would get nothing when he died a year before the age of state retirement.
She said: “He paid all these years and saw nothing. I couldn’t believe he didn’t get anything for it either – we’ve been married since 1978.”
Mrs Wright’s husband would have started receiving the state pension next month and, under the rules before the reform in 2016, would have been able to claim part of the state pension to top up his income.
He added: “The rules have changed a lot and it’s hard to plan. It seems very unfair.”
The latest figures from the Office for National Statistics show around 60,000 people die between the ages of 45 and 64 each year.
Kirsty Stone, of financial adviser The Private Office, has 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, returning five per cent a year.
She warned: “This is a big difference.
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“Families may wrongly assume they will receive some or all of their deceased partner’s state pension and could be in line for a financial shock at a time when they are already dealing with the stress of a family bereavement “.
Pensions experts believe the current rules in place are extremely harsh, with many women let down because they relied on their husband’s work record for retirement.
Mel Wright, from Rest Less, an online community for over 50s, said: “Losing your partner is devastating enough.
“But finding you are entitled to none or only a small part of your state pension, particularly if you have paid National Insurance contributions throughout your working life, can be a huge blow to those who are already struggling to reach the end of the month”.
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Former pensions minister Sir Steve Webb, who was behind the new state pension rules, said the old system was designed on the assumption that married women would spend their lives financially dependent on their husbands.
But the new rules are aimed at “202 and beyond”, where both men and women now have the chance to collect a full state pension.
He added: “It can be difficult if someone has paid in all their life and doesn’t use that money, but the change means the vast majority of women will receive a higher state pension in retirement.”
A spokesman for the Department for Work and Pensions said: “The new state pension system improves outcomes for millions of women, with payments expected to be equalized between men and women a decade earlier than the previous system.
“Pension Credit is available to those who are eligible and provides a safety net for people who need it most.”