Parents with young children who are widowed in future could miss out on £1,000s once changes to a Government bereavement scheme are rolled out in April. But a broader overhaul means childless widows and widowers aged under 45 will benefit from a bereavement allowance for the first time.
Losing your nearest and dearest is always a painful experience, but amid the upheaval it's easy to forget your finances can become strained. Fortunately a little-known state-run payment and allowance scheme exists to help those in their hour of need.
As it stands, if your husband, wife or civil partner has died then you may be entitled to a tax-free, lump-sum payment of £2,000. Plus, you may also be able to claim an allowance of up to £112.55/week (see below for more on this).
It means it's currently possible for a parent of a new-born baby where the other parent has passed away to receive up to £119,052 in bereavement payouts – the £2,000 lump sum plus weekly payments of £112.55 for 20 years (the maximum age at which a child no longer qualifies for child benefit – and therefore the parent loses the bereavement allowance).
However, in the move by the Department for Work and Pensions (DWP) to simplify the bereavement payout process, if you were to lose your other half from 6 April 2017 widows and widowers with children will receive an initial lump sum of £3,500, while those without children will get £2,500. This will be followed by 18 monthly payments of £350 for those with children or £100 for those without. The maximum available under the simplified scheme will be £9,800.
If you're already claiming under the existing scheme, you WON'T be affected by the changes – only those who lose their other half as of 6 April will be impacted. If you're not already claiming bereavement support and you're eligible to do so, check out the Government site on how to apply.
Caroline Nokes, Minister for Welfare Delivery, has called the new process "a simple, uniform and easy-to-understand benefit that better reflects society". Though while some will receive more money as a result of the change, many others will end up with far less than they would've received under the old system.
Check out our Cheap and Free Wills guide for info on how to provide financial protection for the ones you love.
How does the existing process work for bereavement payouts?
The current process for providing financial assistance to those who have suffered the loss of their significant other involves a three-tiered approach:
- Bereavement Payment: A tax-free lump sum of £2,000, payable when a spouse or civil partner dies, generally for people under state pension age.
- Widowed Parent's Allowance: A taxable weekly benefit for parents who lose their spouse or civil partner. It's paid until the claimant reaches state pension age, begins a new relationship (ie, marries, cohabits or enters a civil partnership) or becomes ineligible for child benefit (ie, their youngest child turns 20 or leaves full-time education, whichever is earlier).
The amount paid depends on the deceased person's national insurance contributions – understood to be at least enough to qualify for the state pension but we're double-checking – to a maximum of £112.55/week.
- Bereavement Allowance: A taxable weekly allowance paid for one year, to widows, widowers and surviving civil partners over the age of 45 without dependent children.
The amount received depends on the deceased person's national insurance contributions and the claimant's age, from £33.77/week for 45-year-old claimants to £112.55/week for those between 55 and state pension age.
If you're already claiming any of the above then you will continue to receive the same amount of support after the changes are introduced. The incoming process will only impact claimants who lose their significant other on or after 6 April.
Check out the Government site on how to claim bereavement support.
Am I eligible to claim under the existing system?
These benefits are not means-tested and eligibility is determined by the deceased's national insurance contributions.
You may be able to get a bereavement payment (the £2,000 lump sum) if, when your husband, wife or civil partner died, you were either:
- Under state pension age, OR
- Over state pension age and your husband, wife or civil partner wasn't entitled to a state pension based on their own national insurance contributions
Additionally, your husband, wife or civil partner must have either:
- Paid enough national insurance contributions, OR
- Died as a result of an industrial accident or disease
You can't get a bereavement payment if any of the following are true:
- You were divorced from your husband, wife or civil partner
- You're living with another person as husband, wife or civil partner
- You're in prison
For you to be eligible for the widowed parent's allowance or bereavement allowance, the deceased must additionally have paid or been credited with the sufficient national insurance contributions for a defined proportion of their working life.
If you're eligible but yet to lodge a claim, your claim can be backdated up to three months. A claim can also be made up to three months after you cease to be eligible.
Meanwhile, it's important to note that if you also claim other income-related benefits, your bereavement allowance is taken into account as income. This means the amount of bereavement allowance received would be deducted pound-for-pound from income-related benefits.
The situation is similar for widowed parent's allowance, except that £10 of this benefit is disregarded when calculating income for other benefits.
How will the new bereavement support payment system work?
In a radical overhaul of the current system, which was last reformed in 2001, the new 'bereavement support payment' will consist:
- An initial lump sum of £3,500 for people with children, and £2,500 for those without children
- A further 18 monthly instalments payable to the surviving spouse or civil partner of £350 for those with children, and £100 for those without
What do the changes mean in practical terms?
The changes represent a financial improvement for childless widows and widowers aged under 45 (who will receive a payout for the first time), while widowed parents of older children who are near the cut-off for child benefit will also do slightly better out of the new system.
However, widowed parents of younger children could miss out on thousands of pounds.
Based on the DWP's calculation that the current average award for widowed parent's allowance is £104.51/week, we crunched the numbers and found that only widowed parents with a child aged up to one year, five months and two weeks under the child benefit cut-off (16 or 20 for a child in full-time education) will benefit from the change.
This means that as of 6 April, only widowed parents with a child aged 14 years and six and a half months (or 18 years and six and a half months for those still in full-time education) will receive more financial support than they would've under the old system.
How many eligible people are not claiming?
We've asked the DWP for up-to-date figures on the number of people who might be entitled to bereavement support but are not claiming it. We'll update this story when we hear back.
However, a report in November 2015 by the Social Security Advisory Committee found that DWP spent £582 million on bereavement benefits in 2013/2014. In the 2014 calendar year, 28,830 people started a claim for bereavement benefits.
The report also showed that in 2013, 190,460 people who were married or in a civil partnership died in England and Wales.
Yet it was argued that this is not a good guide to the number eligible for bereavement benefits, as of these deaths, 156,056 were aged 65 or over, and if it's assumed that their partners were of similar age, then many would not be eligible to claim bereavement benefits.
What does the DWP say?
Welfare Delivery Minister Caroline Nokes says: "Losing a spouse or civil partner can be devastating and we want to provide people with easily accessible support to help them through the difficult period following bereavement.
"The old system could be unfair, complex and also act as trap preventing people from moving on with their lives. That's why we are modernising this support into a simple, uniform and easy-to-understand benefit that better reflects society and helps people through what can be a very difficult time."