It is a sad fact but with Coronavirus a threat to us all may be it’s time to review your family's death benefit entitlement.
Outside of any life assurance you may have other sources of death benefit that your family may be entitled to. Here we take a brief look at two sources of provision for your family should you pass away and what your family should do at such a time.
The State provisions and
Pension provisions.
State provisions
What to do about their State Pension
If the person who died was getting a State Pension, you should tell the Pension Service that he or she has died so that payments stop.
Claiming their State Pension
You might be entitled to extra pension payments from your spouse’s or civil partner’s State Pension.
It depends on the amount of National Insurance (NI) contributions they made and when you and your spouse or civil partner reach(ed) the State Pension age.
If you haven’t reached State Pension age, you might also be eligible to claim Bereavement benefits.
Contact the Pension Service on 0800 731 0469 (free to phone) to find out whether you are eligible to claim.
Claiming bereavement support payment and other benefits
The death of a spouse or partner is a very difficult experience. This change in your life can be even harder if you now have to live on a lower income. The help you can claim depends on your relationship with the person who died and whether you were married or in a civil partnership or living with your partner. This page tells you more about bereavement benefits and other help you might qualify for if you’re now living on a low income.
Bereavement benefits if you were married or in a civil partnership
Bereavement benefits are for people whose husband, wife or civil partner has died. Which benefits and how much you qualify for will depend on:
your age
whether you have dependent children
whether the person who died paid enough National Insurance Contributions during their working lives.
If you and your spouse were eligible to claim marriage allowance at any time from April 2015, but didn’t claim before the death of your partner, you can now claim up to four years’ worth of backdated missed payments.
Bereavement Support Payment
Bereavement Support Payment replaces Bereavement Allowance, Widowed Parent’s Allowance and Bereavement Payment.
The benefit is paid to you at one of two rates depending on whether you are responsible for children.
You must be below State Pension Age to claim Bereavement Support Payment.
Your spouse or civil partner must have made National Insurance Contributions for at least 25 weeks during their working life for you to qualify. If your husband, wife or civil partner died because of an industrial injury, their national insurance contributions might not matter.
Bereavement Support Payment is only paid for 18 months after the date when your spouse or civil partner died so it’s important you claim as soon as possible to avoid losing money.
How much is Bereavement Support Payment?
Bereavement Support Payment is paid at either a higher rate or standard rate:
Higher rate
Paid to pregnant women or if you’re entitled to Child Benefit. You’ll get:
a monthly payment of £350 for 18 months following the death
a one-off payment of £3,500 during the first month.
Standard rate
For everyone else. You’ll get:
a monthly payment of £100 for 18 months
a one-off payment of £2,500 during the first month.
You might also be eligible to claim other low income benefits to top up your income, like tax credits, Housing Benefit, Council Tax Reduction or Universal Credit.
Funeral Payment
What is Funeral Payment?
If you’re on a low income and struggling to pay for a funeral for your partner, you can apply for a Funeral Payment.
If the person who died left money, you will usually need to pay back any amount you received through the Funeral Payments scheme.
How much you will get
The amount you get depends on your circumstances, but could be up to £700 towards funeral expenses plus payments to cover the costs of things like burial or cremation fees.
How your bereavement benefits affect other benefits
If you are getting Bereavement Support Payment it will not affect your other benefits for a year. After then, the income you get from it will be taken into account for means-tested benefits including:
Tax Credits
Universal Credit
Income Support
Incapacity Benefit
Jobseeker’s Allowance
Carer’s Allowance
Employment and Support Allowance
The lump sum you get as part of Bereavement Support Payment might count as savings when your entitlement to some means-tested benefits is worked out.
This will only be if you have any of the lump sum left over after 12 months that takes you over the savings limit of £6,000 for means-tested benefits.
This means you you might see a reduction in any of these benefits you might be getting:
Income Support
Housing Benefit
Income-based Jobseeker’s Allowance
Employment and Support Allowance
Universal Credit
Pension provisions
If someone close to you dies, you may receive a cash lump sum benefit from their pension scheme.
A pension scheme may pay lump sum death benefits to financial dependants if a member dies. The amount paid depends on the scheme’s rules and whether the member was an active member of the scheme. Lump sum death benefits are usually paid tax-free, they are paid at the discretion of the scheme’s trustees or pension provider. The trustees or pension provider will take into consideration the member’s wishes as set out in the expression of wishes or nomination of benefits letter, if this was completed but will not necessarily follow them; for example if they have grounds to believe that they are out of date. It's therefore very important that you keep your expression of wishes form up to date.
Different ways lump sum death benefits may be provided
Life cover:
Workplace pension schemes may include life cover for members that are contributing to the scheme (active members). The amount payable is often expressed as a multiple of the member’s pensionable earnings or salary (for example, 2 x pensionable earnings or 4 x salary). Defined benefit Pension schemes may also pay a refund of the contributions paid by the member, subject to the scheme’s rules, if the member dies before starting to draw retirement benefits. If the member had started to draw retirement benefits, an annuity may pay a pension protection lump sum if the member dies. This is usually worked out as the difference between the cost of securing the member’s pension benefits and the amount (before tax) that has actually been paid out up to the date of the member’s death;
Defined contribution
Pension schemes normally pay the value of the pension pot tax free if the member dies before starting to draw retirement benefits, provided they are aged less than 75 at the date of death. If the member has started to draw retirement benefits, and/ or dies after the age of 75, and the value of the remaining pension pot is paid as a lump sum to dependants, this is taxed at the recipient's marginal rate.
Guaranteed periods on annuities: If an annuitant dies and the annuity includes a guarantee period any outstanding payments due over the guarantee period may be paid as a lump sum. This payment would normally be made to a surviving annuitant or to the annuitant’s estate.
How they are paid
Lump sums are normally paid at the discretion of the scheme’s trustees or pension provider, although you can tell them who you would like to benefit should you die using an expression of wishes letter or nomination of benefits form. These are not binding on the trustees or pension provider and they will take them into account but may not follow them; for example if they have grounds to believe that they are out of date. It is therefore very important that you keep your expression of wishes form up to date. If you purchased an annuity when you started to draw pension benefits, you may have included a guarantee period, which pays the balance of any pension due over the guarantee period if you die, and/ or included a continuing pension after your death payable, usually, to your surviving spouse, partner or civil partner.
Using a trust
If you have a personal pension, self-invested personal pension (SIPP) or stakeholder pension scheme, you may be able to ask your pension provider to pay any death benefits to a trust that you have set up, or that is set up by your will. This may be done for estate planning or inheritance tax planning purposes. You can also ask the trustees of a workplace pension scheme to pay benefits to a trust, but, as mentioned earlier, your request is not binding. Once the death benefits have been paid to the trust, your trustees can distribute them to your chosen beneficiaries, subject to the terms of the trust.