House of Commons Library

Inheriting pension rights

Published Monday, November 4, 2019

This note is an overview of the development of the different arrangements for inheriting pension rights in State and private pension schemes.

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State Pension

Under the old State Pension system, for people who reached State Pension age before 6 April 2016, individuals could derive entitlement to the basic State Pension based on the contribution record of their late spouse or civil partner. This could provide a basic State Pension of up to £129.20 pw for a widow, widower or surviving civil partner (2019/20 amounts). It was also possible to inherit additional State Pension, with the amount they could inherit depending on when they reached State Pension age.

When it introduced the new State Pension for people reaching State Pension age from 6 April 2016, the Government’s intention was that people should qualify on the basis of their own NI record, so the ability to derive or inherit State Pension entitlement ended, with limited transitional protection.

Private pensions

There are two main types of private pension – defined contribution (where an individual makes contributions to a pension pot, which is invested, and which can then be used to provide an income at retirement) and defined benefit (which provide pension benefits based on fixed factors – salary and length of service).

The ‘pension freedom’ reforms gave people aged 55 and over more flexibility about when and how to draw their defined contribution (DC) pension savings, subject to their marginal rate of income tax from April 2015. As part of this, the Government also introduced more flexibility in the payments that could be made on death. Whereas previously, a DC scheme member had to leave unused funds to a ‘dependant’ (a surviving spouse/civil partner or child under age 23), from April 2015, they would be able to nominate a beneficiary to receive their funds. There were also reductions in the tax charges applying to some lump sum payments.

Under pension tax legislation, a survivor’s pension from a defined benefit scheme can usually only be paid to a dependant of the person who died, for example a husband, wife, civil partner or child under 23. The payments that can be made in an individual case will depend on scheme rules, which in turn reflect statutory minimum requirements in occupational pensions legislation. Information is on Gov.UK: Your benefits, tax and pension after the death of a spouse

Many FAQs in this area relate to public service pensions, reflecting the fact that improvements in survivors’ benefits have been introduced over time but not made retrospective on grounds of cost. As a result, survivors’ pensions from the old schemes (or where the scheme member had no active service after the reforms were introduced) may be subject to restrictions – for example, they may be withdrawn on remarriage or cohabitation and there may be no provision for cohabitees. Widowers’ pensions are provided on service from 1988, compared to 1978 for other survivors.

Relevant Library Briefing Papers are: CBP 7109 Lifetime survivors’ pensions from public service pension schemes; CBP 6348 Occupational pensions: survivors benefits for cohabitants; CBP 3035 Pensions: civil partnerships and same-sex marriages.

Please note that nothing in this paper should be considered as constituting legal advice. It is not intended to address the specific circumstances of a particular individual. A suitably qualified professional should be consulted if specific advice or information is required.

Sources of information, guidance and help with individual cases include:

  • The Pension Service – responsible for delivering the State Pension and Pension Credit, can also answer questions (for example, about eligibility, claims, payments), receive complaints about issues such as unreasonable delays and reports of a change in circumstances.
  • Pension Wise - provides free and impartial government guidance to people aged 50 and over about their defined contribution pension options;
  • The Pensions Advisory Service - funded by DWP to provide free and impartial guidance to people with workplace and personal pensions;
  • The Pensions Ombudsman early dispute resolution service – for people with potential complaints about workplace or personal pensions;
  • The Financial Ombudsman Service - can consider complaints about the administration of personal pensions and group personal pensions (but not complaints about the administration of occupational schemes)
  • Age UK - runs an advice line and has information and factsheets about a range of issues on its website.
  • Citizens Advice Bureau - can provide advice on a range of issues.

Commons Briefing papers CBP-8635

Author: Djuna Thurley

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