Cohabitees may find it easier to access deceased partners’ pensions after landmark ruling
A woman has finally won the right to her long-term partner’s pension, after an eight-year legal battle was settled in the Supreme Court this week.
The victory could have wide reaching implications for members of public sector pension schemes.
Denise Brewster, did not receive any of her partner’s pension after he died suddenly in 2009. Although she had lived with her partner, Lenny McMullan for 10 years in a home they jointly owned and had recently got engaged, her partner’s pension scheme would not pay her a ‘widow’s pension’ because the couple were not legally married.
As a cohabitee, Ms Brewster could have been entitled to a survivor’s allowance, but her partner, Mr McMullan had not completed a nomination form naming her as his intended beneficiary.
When he died, Mr McMullan was paying into an occupational scheme run by the Northern Ireland Local Government Officers’ Superannuation Committee.
But the Supreme Court condemned the use of such nomination forms, describing them as “unlawful discrimination” because married couples did not have to complete them.
Although the English, Northern Irish and Welsh local government pensions have already abolished the need for unmarried couples to complete nomination forms it is now thought that more schemes will follow suit, for example those for teachers and NHS workers.
This would mean that cohabitees could benefit from their partner’s pension without needing to be ‘opted in’.
Steve Webb, director of policy at Royal London says change is long overdue. “We think pension schemes are going to see the writing on the wall and make the change. With more than six million cohabiting couples this is not an niche issue and we need pension rules to reflect the world we live in.”
To qualify for a so-called ‘survivors allowance’ couples may need to demonstrate that they have been together long term (for example two years) and have shared finances such as a joint mortgage or bank account.
Make sure your pension goes to the intended beneficiary
Irrespective of what happens or whether or not you are financially dependent on a partner, Kate Smith, head of pensions at Aegon says the landmark case provides a timely reminder for unmarried couples to assess their position: “Increasingly couples cohabit rather than get married or enter a civil partnership. This week’s case should act as prompt to both public and private sector pensions to make sure they are clear on a saver’s or retiree’s beneficiaries. In the meantime however, there are some simple steps that people can take to make sure their wishes are followed, such as checking you’ve nominated a beneficiary and checking any rules that govern this process.”
Ms Smith’s tips are as follows:
1)Nominate beneficiaries: The first step is to make sure your partner is listed as a beneficiary on your pension. A form will have been given to you when you started the pension however if you didn’t complete it, it is important to do so now. Alternatively you may have completed it at the time and have a new partner so it is important to keep it up to date.
2)Check the scheme rules: Find out whether there are any rules that limit who payments can be made to or whether they require unmarried couples to have been together for a fixed period of time.
3)Pension freedoms: Following April 2015’s pension freedoms any unspent pension can be passed to loved ones, and if you die before the age of 75 this money is paid tax free (income tax may be payable after age 75). This makes it even more important that your pension company knows where you want the money to go.
4)Make a will: Without a will your estate (which does not include your pension) will be distributed according to the rules of intestacy. These rules do not take unmarried couples into account, so without a will your money and property could end up going to family members rather than a partner.
Kay Ingram, chartered financial planner at LEBC adds that it’s also vital for unmarried couples to talk about their finances. She says: “One of the biggest mistakes is not talking about money. In Ms Brewster's case her late partner clearly misunderstood what was required to secure a pension for her in the event of his prior death. The rules governing pensions for dependents are not uniform and co habiting couples are often not entitled to any benefits, or only at the discretion of trustees.
“While Ms Brewster has now been able to resolve this after a long court battle, this can be avoided by undertaking a review of finances and making separate provision.”
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