State pension warning: Widows and widowers in 'financial shock' after contributions vanish


The old state pension system saw widows able to inherit everything – even if their husbands passed away before they were able to collect their pension. But in 2016, reforms were introduced that meant widows were no longer able to automatically inherit any state pension from their late husband or wife. As much as £145,000 can be paid in National Insurance contributions to reach the full state pension in retirement, but these cannot be passed on if the person dies before turning 66-years-old.

Alison Wright, 66, from Fife in Scotland, was stunned to find that her husband’s 40 years’ worth of contributions had disappeared when realising she would not receive anything when he died one year before reaching the state pension age.

She said: “He paid in all those years and didn’t see any of it. I couldn’t believe that I was going to get nothing for it either – we have been married since 1978.”

Mrs Wright’s husband would have started to receive the state pension next month and under rules before the shake-up in 2016, she would have been able to claim part of his state pension to supplement her income.

She added: “The rules have changed so much and it’s hard to plan. It seems so unfair.”

The latest figures from the Office for National Statistics show some 60,000 people who die between the ages of 45 and 64 each year.

Kirsty Stone of financial adviser The Private Office has calculated 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 these payments were invested in the stock market, returning five percent a year.

She warned: “This is a stark difference.

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“Families may wrongly assume they will receive some or all of their late partner’s state pension and could be in line for a financial shock at a time where they are already dealing with the stress of a family bereavement.”

Pension experts believe the current rules in place are extremely harsh, with many women let down as they were relying on their husband’s work record for retirement.

Mel Wright, of Rest Less, an online community for over-50s, said: “Losing your partner is devastating enough.

“But discovering you’re not entitled to any or only a tiny part of their state pension, especially if they’d paid National Insurance contributions throughout their working lives, can be a huge blow to those already struggling to make ends meet.”

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Former pensions minister Sir Steve Webb, who was behind the new state pension rules, said the old system was designed with the assumption that married women would spend their lives being financially dependent on their husbands.

But the new rules are aimed at the “202s and beyond”, where both men and women now have the opportunity to accumulate a full state pension.

He added: “It can be difficult if someone has paid in all their life and doesn’t get to use that money, but the change means that the vast majority of women will get paid a higher state pension throughout their retirement.”

A spokesman for the Department for Work and Pensions said: “The new state pension system improves outcomes for millions of women, with payments projected to equalise between men and women a decade earlier than the previous system.

“Pension Credit is available for those eligible and provides a safety-net for individuals who are most in need.”



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