My husband died before he could draw his state pension – why haven’t I inherited any of it? Steve Webb replies
My husband was born in 1950 and died in 2015. He was eight weeks away from state pension age.
He was full-time employed, but I have no idea of his National Insurance contributions.
I have now just received my first payment of my state pension. On the letter it states where my husband’s name is ‘inherited pension zero’. Would this be correct?
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Money question: Why haven’t I inherited any of my late husband’s state pension?
Steve Webb replies: As you may know, a new state pension system was introduced from 6 April 2016.
As you reached pension age after this date, you come under the new system and your late husband would have come under the old system.
Although you are on the new system, your pension can still be topped up by inherited payments based on your late husband’s rights under the old system.
But whether you get an inheritance and, if so, how much, depends on how your late husband’s pension was made up (or would have been if he had drawn it).
Under the old state pension system, there were two main elements – a ‘basic’ state pension and an additional or ‘earnings-related’ pension often called SERPS.
As you come under the new state pension you cannot inherit any of your late husband’s basic pension but you can inherit at least half of his additional state pension.
(You can also inherit part of his ‘graduated retirement benefit’, which is a smaller part of the state pension for people who worked between the early 1960s and the mid 1970s).
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The size of the additional state pension your late husband would have received depends on his work history.
Some people build up little or no additional pension whereas others build up a substantial amount.
Starting with those who get little or no additional state pension, the first major group is the self-employed.
Their NI contributions entitle them to a basic pension but not a SERPS pension.
So if your late husband had been self-employed all of his life there would have been no SERPS pension to inherit.
The second group who have low SERPS pensions are those who were in a public sector pension or a company pension scheme that was ‘contracted out’ of the state scheme.
As a rough guide, if you are now getting a widow’s pension from a workplace pension scheme, the chances are that your husband was contracted out of SERPS and so there is little to inherit from his state pension.
But if he fell into neither of these groups and had a full working life as an employee (or at least since 1978 when SERPS was introduced) then he will have built up a meaningful amount.
Because your husband was born in 1950, you are entitled to inherit 50 per cent of his SERPS pension.
For people whose late spouse was born much earlier than this, a higher percentage may apply as explained here.
You mentioned that your husband was full time employed so we can rule out self-employment as a reason for you not to inherit anything.
Most likely is that he was in a ‘contracted out’ workplace scheme and you are now receiving a widow’s pension from that scheme rather than from the state pension.
But if this is not the case I would be happy to look into this further in case a mistake has been made.
Ask Steve Webb a pension question
Former Pensions Minister Steve Webb is This Is Money’s Agony Uncle.
He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.
Steve left the Department of Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock.
If you would like to ask Steve a question about pensions, please email him at email@example.com.
Steve will do his best to reply to your message in a forthcoming column, but he won’t be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
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If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a Government-backed organisation which gives free help to the public. TPAS can be found here and its number is 0800 011 3797.
Stevee receives many questions about state pension forecasts and COPE – the Contracted Out Pension Equivalent. If you are writing to Steve on this topic, he responds to a typical reader question here. It includes links to Steve’s several earlier columns about state pension forecasts and contracting out, which might be helpful.
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