The Government Giveth and Takes Away

A review of the new Bereavement benefits *

The government has made some major changes, in April 2017, to the bereavement benefits people can receive if their spouse or civil partner dies. George Critchley, a Director at Jones Harris Chartered Financial Planners addresses the changes.

WHAT ARE THE NEW FEATURES?

  • If you have no dependent children, the bereavement payment is £2,500 as a lump sum followed by 18 monthly payments of £100.
  • If you have dependent children, the lump sum rises to £3,500 followed by 18 monthly payments of £350.
  • The benefit is not means tested.
  • For the full payment the deceased must have paid sufficient national insurance contributions in any one year before their death.
  • All payments are tax free.
  • Payments are disregarded for the purpose of Universal Credit
  • Getting married, entering a civil partnership, or cohabiting does not affect payments.
  • Claimants age does not affect the amount received.

HOW DOES THE NEW BENEFIT DIFFER FROM THE OLD?

The new 18 month period of payment is an improvement on the old 12 months. However a widowed parent with a newly born baby could potentially receive £119,052 under the current system as opposed to £9,800 under the new. The average total payment under the current system is £29,000. The new system will reduce payments by 2/3rds or more.

The initial lump sum is higher, but the monthly is lower, especially for widowed parents with dependent children. The current widowed parent’s allowance or bereavement allowance both have a maximum payment of £488 per month.

All payments will be tax free. The old widowed parent’s allowance and bereavement allowance were taxable.

The new allowance will have no impact on other means tested benefits. The old allowances did.

The old allowance could affect the benefit cap, the new doesn’t.

The old allowance could be affected by a new relationship, the new one isn’t.

The old allowance could be affected by age whereas the new one isn’t.

The old allowance had much more complicated National Insurance requirements for the deceased.

So there we have it, a much simpler system to operate but potentially much lower overall payments especially to a young widowed mother or father.

My advice :- Don’t rely on the state. Take out your own life insurance now. You might be surprised by how little it costs.

Make the right decision for you

Not sure where to start or what insurance cover you require? Let the advisers at Jones Harris Chartered Financial Planners help you. For more information, please don’t hesitate to call Jones Harris Chartered Financial Planners on 01253 874255 or email info@jones-harriscfp.co.uk.

*source: Personal Finance Society (summer 2017)

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