Over 750,000 savers risk passing pension to wrong person on death
March 5th, 2018
Three-quarters of a million people coming up to retirement are at risk of their pension being passed on to an ex-partner when they die, according to research by Royal London.
The insurer estimated some 773,000 people aged between 55 and 64, who are now in second or subsequent relationships, may be affected by this issue.
According to Royal London, the problem arises where people have told a pension scheme they want “any payments after their death to go to a first spouse” but then subsequently divorce, remarry or form a new partnership.
It added ‘expression of wishes’ forms are often not updated to reflect “people’s changing personal circumstances such as divorce or remarriage,” meaning that an ex-partner could be in line to receive pension death benefits.
This document is for members to fill in outlining how they would like to allocate their scheme benefit should they pass away. Trustees and pension providers will consult these forms when deciding how to allocate pension death benefits alongside consulting wills and speaking to family members.
The insurer said that unless this paperwork with the scheme is updated, there is risk that any benefit for widows or widowers will go to an ex-partner.
Royal London personal finance specialist Helen Morrissey commented: “Over the course of our lives, many of us will be in a number of different relationships.
“The person we want to receive any pension benefits after we are gone is likely to change over time. But if we have not told all of our past pension schemes about our new wishes and our new circumstances, there is a risk that the wrong person will stand to gain.”
She added it was important people made sure all this information was kept up-to-date.
Royal London conducted this study by looking at Office for National Statistics (ONS) data from its Wealth and Assets survey released in June 2016 to do its calculations. The data showed there were 6.7 million people in England and Wales aged between 55 and 64 in mid-2016.
It also demonstrated approximately 20% of this cohort had remarried by the age of 50. This equated to 1.34 million people who could be affected by this issue.
It then looked at the number of people in this age cohort who are now cohabiting having previously been married as well as those who cohabit but had never been married before. ONS statistics showed there were 338,630 people cohabiting who had previously been married, and 163,538 people in this age group who were cohabiting having never previously been married.
Adding this to the 1.34m people who had remarried it arrived at a total of 1.84m. The insurer then looked at what proportion of this age group has a pension. Data from the ONS Wealth and Assets Survey showed that 42% of this age cohort had pension wealth.