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Inheriting a pension

Three weeks ago, I cried because my stepfather didn’t die. Last week, I cried when he did.

My stepfather had been very ill for several years. He was never going to recover, and towards the end, asked repeatedly to die. So tears of frustration when we could not help, then mourning when he did, finally, get what he wished.

Now my mother has the burden of paperwork and administration afterwards, while shouldering her own grief.

Sorting out pension payments is one part, and can come as a shock to the system for many bereaved people.

More details below about:

1. Inheriting a private pension
2. Inheriting a workplace pension
3. Inheriting a state pension

Previous post: What is a pension and why you should care

1. Inheriting a private pension

My stepfather used money saved in a private pension to buy an annuity from an insurance company.

With an annuity, you hand over your pension pot, and in exchange the insurance company promises to pay an income for the rest of your life, no matter how long. Annuities are unpopular nowadays, because annuity rates are low. This means people seem to get little money back for handing over a large lump sum. However, they do provide peace of mind that the limited money won’t run out.

Joint life or single life?

When buying an annuity, you can choose between single life or joint life versions. Usually with a single life annuity, you get more income – but when you die, the money stops. With a joint life annuity, you can ask for payments to continue to a spouse, partner or even a dependent child until they reach 23. You choose how much should continue – for example all of it, two thirds, or commonly half the amount at the time you die. It’s a balance. The larger the amount that continues after your death, the less you’ll receive each year during your own life.

Check pension statements for the contact number, address and any policy numbers.

My mother is due to get half my stepfather’s annuity, once all the admin is sorted out.

2. Inheriting a work place pension

Whether or not you can inherit any workplace pension, and how much, all depends on the rules of the individual pension scheme. All you can do is write to the scheme and find out.

If you’re thinking ahead, ask to fill in an “expression of wish” form. It’s a request setting out who you’d like to receive any benefits payable on your death. It’s not binding on the pension scheme, but will help in their decisions. Then make sure to update the form if your circumstances change!

However, as my mum and stepdad were both self-employed before retirement, there isn’t a workplace pension involved.

3. Inheriting a state pension

The introduction of the new State Pension from April 2016 should make State Pension payments much simpler in future.

However, right now, it’s a hideous tangle, taking account of the old system too.

Whether or not you can inherit any State Pension depends on:

• your ages
• marital status
• National Insurance contributions
• when you got married or had a civil partnership
• if you got divorced before reaching pension age
• whether either of you had already started claiming the State Pension.

See what I mean about complicated?

Now, my mum and stepfather both reached State Pension age before April 2016, and were both already claiming it.

Married Woman’s Stamp

Like millions of other women, my mother doesn’t get a full State Pension.

She paid the “married woman’s stamp”, also called “small stamp”, offered to working women up until 1977. This meant she paid lower National Insurance contributions while working – but then got less State Pension later.  People couldn’t sign up for married woman’s stamp after 1977, but could could continue at the lower rate if they were already paying it.

Married woman’s stamp was all based on the idea of the man as the main breadwinner, with a wife dependent on his earnings. People who paid married woman’s stamp could claim 60% of their husband’s State Pension, based on his National Insurance contributions, but only when their husband reached State Pension age.

Check if you might be entitled to higher State Pension payments based on your partner’s contributions

As widow, my mum may now be able to claim some of her late husband’s State Pension. She can apply to use his National Insurance record, instead of her own, and potentially end up with more than she got before.

Widows or widowers whose other half received additional State Pension may also be able to inherit part of that.

To claim, call 0191 218 7608. You will need both your National Insurance number, and the National Insurance number for your spouse or civil partner. But if you don’t have them, the pension service should be able to track down the details using full names and dates of birth.

More info on inheriting a state pension.

Now – over to you. Any advice on sorting out pensions paperwork? Do share in the comments, it would be really helpful.

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