“For the purposes of the state pension, the client could first contact The Pension Service for clarification.”
Inheritance and wills
Inheritance tax can be an issue especially for unmarried couples, as Clare Moffat, technical manager for Prudential, outlines: “The inheritance tax nil-rate band is only transferable to a spouse or civil partner.
“If someone dies without a will, then the law of intestacy only applies to spouses or civil partners. You could have the scenario of a couple living together for a long time and jointly owning property but there being a separated spouse.
“If there is no will, then on death, 50 per cent of the house could end up belonging to the separated spouse.”
Wills are vital to help protect unmarried hetero or homosexual couples; if you do not offer a will-writing or probate service, make sure clients are made aware of, or introduced to, a legal practice that can help ensure that the wishes of the deceased are protected in law.
Therefore it is useful as an adviser to create professional partnerships with good local law firms to help clients through this emotional and legal minefield.
Advice and lobbying
Ms Moffat adds: “Seeking financial advice is key. From a purely financial planning point of view, being married or in a civil partnership will always be preferable to cohabiting.”
Robin Ellison, consultant with Pinsent Masons, suggests: “Advisers should impress on their clients that marriage or its equivalent is important to consider for both enjoying survivors’ benefits and IHT reliefs.”
His comment highlights a political issue: while clients have freedom to choose their relationship style, not all clients will have full legal and financial rights.
And even with the 2013 Marriage (Same-Sex) Act and the 2004 Civil Partnerships Act, no laws have been made to remove barriers to full financial equality, predominantly on grounds of cost.
In its response to the May 2014 government consultation on survivor benefits, the Public and Commercial Services Union states: “The government says equalisation of pension provisions would entail unforseen costs to pension schemes, but there is no justification or room for discrimination.”
The UK has made great strides during this century towards equality but while inconsistencies in the application of the law remain, advisers with unmarried clients and clients in civil partnerships or same-sex marriage will have to deal with some sticky pensions problems for the foreseeable future.