The government is making major changes to the bereavement benefits people can receive if their spouse or civil partner dies.
The Bereavement Payment, Widowed Parent’s Allowance and Bereavement Allowance will all be scrapped in favour of a new system called the Bereavement Support Payment.
The shake-up of the system, which comes into effect from April 6 2017, will mean most widowed parents will get as much as £12,000 less financial support.
Under the current system, when a spouse or civil partner dies the surviving partner is entitled to a £2,000 tax-free sum called the Bereavement Payment.
On top of this, the surviving partner may be eligible for Widowed Parent’s Allowance or Bereavement Allowance.
Widowed Parent’s Allowance is paid if you’re widowed under state pension age and have at least one dependent child.
It’s a taxable benefit of up to £112.55 a week, which is paid until the youngest child no longer qualifies for child benefit (so a maximum of 20 years), the widowed parent moves in with a new partner or reaches state pension age.
Those between 45 and state pension age without children qualify for the Bereavement Allowance, which is a taxable benefit of up to £112.55 a week paid for 52 weeks.
These payments are linked to the National Insurance record of the deceased partner and rise in line with inflation.
Under the new Bereavement Support Payment system, there will be a tax-free lump sum of £2,500 for those with no children or £3,500 if those with children.
This will be followed by a monthly tax-free payment of £100 if you don’t have children and £350 if you do. This will last for 18 months, is paid regardless of your age or if you find a new partner and is not linked to inflation.
Winners and losers
The Department for Work and Pensions (DWP) has calculated its reforms will save the government £40 million a year from 2020.
The changes will benefit childless widows and widowers – especially those under the age of 45, who will get an extra £2,300 tax-free under the new system.
Bereaved parents will be able to get an extra £1,500 tax-free as a lump sum, but they will lose out on much more in the long term.
Widowed parents with young children will be the hardest hit, with the minimum payment period cut from 20 years to 18 months – significantly cutting the amount of support these families can get.
The Childhood Bereavement Network (CBN) support group estimates that 91% of widowed parents will be supported for a shorter period under the new system.
It claims that the latest DWP figures show that 75% of bereaved families will be worse off in cash terms under the new scheme, with the average working widowed parent losing out on over £12,000.
Plus, as the new Bereavement Support Payment won’t rise in line with inflation, the support will lose value over time as prices like the cost of a funeral and bringing up a child rise.
The government plans to move widowed parents that need longer term income support onto Universal Credit, but this still means after six months depending on the age of their youngest child the parent must try to take on work at a time they should be focusing on their grieving children.
Alison Penny of the Childhood Bereavement Network said: “We know that children’s grief often takes a while to emerge, and they often face new challenges two or three years down the line.
"It’s vital that their mum or dad – who are coping with their own grief too – have the flexibility to be available to their children.”
A DWP spokesperson defended the move: “The old system, introduced more than 90 years ago, was based on the outdated assumption that a widowed parent relied on their spouse for income, and would never work themselves.
"This doesn’t reflect people’s lives today.
“The new Bereavement Support Payment restores fairness to the system and focuses support during the 18-month period after a loved one dies, when they need it the most.
I"t will be easier to claim, won’t be taxed and will be subject to a disregard for benefit claims, helping those on the lowest incomes the most.”
Cohabiting couples excluded
Cohabiting couples, including those with children will continue to be ineligible for any bereavement benefits under the new system.
The CBN estimates this impacts over 2,000 families with children lose out each year because of their parent’s marital status.
But the DWP has found that the issue is incompatible with the definition of ‘family’ used by the government in the Family Test.
A DWP spokesperson said: “Allowing the surviving members of cohabiting couples to have access to bereavement benefits would significantly increase complexity and require proof of cohabitation, which could be both difficult and intrusive for the bereaved person to establish.”
However, the CBN points out that the department seems to be able to cope with this level of admin when it suits them.
Penny commented: “It seems odd to treat cohabiting partners as a couple for means-tested benefits or tax credits when they are both alive, but then to refuse to recognise the significance of their relationship when one of them dies.”
How to prepare for the worst
A survey from insurer Royal London found that over two thirds of people who had lost their partner over the previous five years were unprepared for the loss of income.
With bereavement benefit worsening for many you should think about taking out a life insurance policy to ensure your loved ones have enough financial support should you or your partner pass away.