Couples Face £82m 'Living Together Penalty'
Wednesday 27 January 2016
Out-of-date benefit rules which treat cohabiting couples as second class citizens are costing them £82 million per year, according to new calculations by Royal London. Under current rules for National Insurance benefits, where one member of a couple dies, the surviving partner may be entitled to a range of financial support including a £2,000 lump sum and ongoing National Insurance bereavement benefits which can be worth more than £10,000. But eligibility is restricted to those who were married – cohabiting couples get nothing.
Using Office for National Statistics data for death rates and cohabitation rates, Royal London estimates that these rules have cost working-age cohabiting couples £82 million in lost benefits in the last year. As the number of people cohabiting continues to rise, and as the average age of cohabiting couples increases, these losses are set to grow.
Whilst the National Insurance system ignores cohabitation, other parts of the benefit system do take account of cohabitation, but only in order to reduce entitlements. Income-related benefits such as Housing Benefit look at the income of a whole household when determining if a claimant has enough money, and for these purposes the income of a cohabiting partner is counted against the claim.
Commenting on the figures, Royal London Director of Policy Steve Webb said:
“Many unmarried couples have been living together for many years and are financially dependent on each other. Yet at a time of bereavement the benefit system treats them as though their partnership never happened. This is despite paying the same National Insurance Contributions into the system as everyone else. When it suits the Government to treat two individuals as a couple it does so, but when it comes to paying money out the Government is happy to deny the existence of a relationship. It is hard to see how this double standard can be justified.”
“A benefits system that was designed in the 1940s needs to be brought up to date. With over six million people in Britain living together as couples, a large and growing number of people risk being left without support in the event of bereavement unless the system is changed.”
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For further information please contact:
Steve Webb, Director of Policy
0207 015 2556
Lorna Wiltshire, Corporate PR Manager
0207 506 6719
Notes to editors:
- Where a member of a working-age married couple is bereaved they may qualify for one or more of:
- Bereavement Payment – a lump sum of £2,000;
- Bereavement Allowance (previously known as Widows Pension) – for those who are over 45, a weekly payment lasting for one year, and worth up to £112.55 per week;
- Widowed Parent’s Allowance, for those with one or more dependent child, worth up to £112.55 per week; benefit can continue until the child leaves school or the widowed parent re-marries.
- The policy paper estimates that a typical older bereaved person could miss out on around £7,800 in benefit, whilst a younger bereaved parent could lose over £25,000.
- Royal London Policy Paper No 1: “The Living Together Penalty” can be downloaded at www.royallondon.com/policy-papers.
About Royal London:
Royal London is the largest mutual life, pensions and investment company in the UK, with Group funds under management of £83.1 billion. Group businesses serve around 5.3 million policyholders and employ 2,958 people. (Figures quoted are as at 30 September 2015).