Pension: Jordan Gillies share tips on planning and investing
Make the most of your money by signing up to our newsletter for FREE now
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
The consultancy LCP have urged couples to make sure they are prepared as, in addition to losing life-long partners, widows could see their standard of living fall drastically.
The rules introduced in 2016 swept away provisions ensuring women could receive pensions based on the contributions of their late or ex-husbands.
The research produced showed that, whereas under the old system women would have to countenance standard of living drops of about nine percent, they are now likely to be left with standard of living drops of a massive 24 percent.
Steve Webb, partner at LCP said: “Coping with bereavement is hard enough, but coping with a sharp fall in living standards thereafter is even tougher.
“Although the new state pension generally pays more to women in their own right at retirement than the old system, it has very limited provision for widows and widowers.”
Although male widowers face a similar lack of protection, they may have been receiving the lion’s share of the couples total pension income so will have adequate income on their own.
Widows face standard of life decreases of around 24 percent when they lose their husband (Image: Getty)
Otherwise known as gender pension inequality, this is a corollary of women earning less money than men throughout their lifetime than men, meaning they can’t save as much into their pension.
“Newly retired couples and those coming up to retirement need to find out where they would stand with state and private pensions if one of them were to die and to explore making additional provision to cushion the financial impact of bereavement”, Mr Webb urged.
Darren Cooke, a chartered financial planner at Red Circle Financial Planning, said: “This is one of those situations where forewarned is forearmed.
“Just being aware of the change in income if one partner dies allows the couple to plan for it and consider how the widow(er) could cope.
“In early retirement the couple need to be careful of taking on debt, as even small interest payments could be a big part of a reduced income. Also, be careful of spending down savings too quickly as they may be better spent to support the survivor once the income drops.
“There is also a need to have a conversation with the wider family, to make them aware that if one person dies the survivor is going to have a significant reduction in income and find out if the family could help out.”
Phil Billingham, a chartered wealth manager and financial planner at Perceptive Planning, encouraged people to consider how long their pension may need to provide for.
He said there is a good chance that in any couple, one will live into their nineties.
What is the state pension? (Image: Express)
“On that basis it is prudent for a couple to treat all wealth and assets as family assets in retirement and where there is the choice to buy an annuity a joint life annuity should be the default option,” He said.
What is happening where you live? Find out by adding your postcode or visit InYourArea
Mr Billingham added: “Given the risk of an income shock, a relatively cheap option would be to take out a level term assurance policy. For a non-smoking male aged sixty, cover of £100,000 would cost just a pound a day and could be money well spent to provide peace of mind.”