Pensions  

What the changes to the state pension post-2016 mean for divorcees

  • Describe some of the changes to the state pension system since 2016
  • Explain the circusmtances when divorcees can get a pension uplift
  • Identify the maximum state pension weekly payment
CPD
Approx.30min

However, the changes will only affect retirees on or after the aforementioned date of 6 April 2016.  There are winners and losers because of the changes. The self-employed are big winners whereas unfortunately, ex-spouses may be among the losers.  

The main issues in respect of the changes are as follows:

  • There is a minimum number of contributions. Under the old system, there was no minimum number of years to qualify for a state pension. If a woman reached retirement age after April 2016, she is now bound to the new state pension scheme, which is reliant on their having made national insurance contributions for more than 10 years. Without this, retirees are usually ineligible for the single tier pension.
  • Some spouses may not qualify for a single tier pension. This would be applicable to spouses who do not have a sufficient National Insurance contribution history and whom do not reach state pension age before April 2016.
  • Under the old rules, it was only necessary to pay qualified National Insurance contributions for 30 years. However, to now qualify for the full amount of the single tier pension of £179.60 per week, National Insurance contributions must be paid over a period of 35 years.  The Duxbury Tables assume the full state pension is payable.  If this is not the case, then there may be insufficient funds to support the required income level of that particular person.  Some higher earners or older people may have had a higher expectation from the old system.  These expectations of higher benefit may have to be factored into any pension report.  Some spouses may only qualify for a proportionate single tier pension.  
  • In November 2018, the state pension was equalised for men and women to the age of 65.  This then increased to 66 in October 2020.  For that reason, those born between 6 April 1960 and 5 March 1961 the state pension will increase steadily to age 67.  For those born on or after 6 March 1961, it will be 67.  State pensions will be reviewed every five years and the expectation is that it will increase in line with life expectancy.  
  • Maintenance agreements may need to be revisited, given that the state pension may not be paid until a later date. Pension credits may be paid a lot later than expected as public sector pension schemes may be moving or may have moved their normal retirement ages in line with the state pension age.  
  • Under the old rules, it was possible to substitute National Insurance records of a deceased or former spouse if they had better National Insurance records.  This will not be available for people reaching state pension age after 6 April 2016.  Previously when instructing a pension expert, it could have been anticipated that the state pension would be dealt with by substitution of National Insurance Records.  This is no longer possible, leaving one party in the divorce with a lower pension income on retirement – this is usually the wife.  Additionally, pension sharing orders will no longer be available after 6 April 2016 in respect of the additional state pension.  Under the old rules, the additional state pension could be included in a pension sharing order.  

It is evident, then, that the new pension scheme is throwing safety nets for widows out the window. It can be an extremely frightening time for widowed spouses, particularly women. The system is complex and requires much more prior consideration than it did before. The summary above will hopefully encourage couples to start planning for their pension futures now so that the scheme cannot take them by surprise. 

It is so important, now more than ever, for couples to find out what their position is with both private and state pensions if one of them were to die. It is sensible to start making considerations for a cushioning in the event of one spouse passing away, particularly should the woman be widowed. There is a wealth of information and advice to be sought out, and the cost of such is truly a worthwhile investment into a stable financial future.   

Phoebe Turner is a Managing Partner and Estella Newbold-Brown is a Senior Solicitor at Stowe Family Law.

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Historically speaking, more women than men have traditionally received final salary pensions, true or false?

  2. What is the likely drop in income anticipated by widows?

  3. Post 2016 there are no inheritance rights for spouses, under the state pension, true or false?

  4. When can a divorced woman benefit from a state pension uplift?

  5. What is the maximum flat rate pension per week?

  6. There is now a minimum number of contributions, true or false?

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You should now know…

  • Describe some of the changes to the state pension system since 2016
  • Explain the circusmtances when divorcees can get a pension uplift
  • Identify the maximum state pension weekly payment

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