Protecting Pension Beneficiaries Following Change in Marital Status
A rise in the number of people getting married or divorced in later life has led to concerns over the possibility of a corresponding rise in the number of pension benefits being paid to the wrong person. The issue has been highlighted by mutual insurer Royal London, which is concerned that people may not remember to update the named beneficiary on their pension policies when their marital status changes.
Royal London explains that pension schemes have forms which allow scheme members to nominate who will be the ‘beneficiary’ if the member were to die. This could cover the payment of an ongoing pension to a surviving widow or widower and/or payment of lump-sum benefits. But if the form is not updated when someone changes their marital status, this can mean an ex-spouse receives the benefits at the expense of a current spouse or partner. It also means that children and stepchildren of a new relationship may not be provided for.
“Far more people are either getting married or separating later in life than in the past,” explained Royal London personal finance specialist Helen Morrissey. “As well as new spouses and partners, this brings new children and step children into the mix. We would encourage anyone who has changed their marital status since they first joined a pension scheme to make sure that the scheme knows their wishes. This includes pension rights that you may have built up when you worked for previous firms.”
Marriage and Divorce in the Over-65s
The rise in so-called ‘silver splicers’ and ‘silver splitters’ was revealed in figures published by the Office for National Statistics. The figures show that:
- The number of brides and grooms aged 65 and over increased by 46% between 2004 and 2014. Over 10,000 over-65s married in 2014.
- There is an overall decline in the number of divorces, but the over-65s are bucking this trend with the number of men getting divorced increasing by 23% between 2005 and 2015 and the number of women getting divorced increasing by 38%.
Fortunately however, all is not lost if pension beneficiaries are not kept up to date, says Royal London. If pension scheme trustees and administrators suspect that the information they hold is out of date, they can undertake their own investigations to decide who should be paid.
There are a number of ways they can do this, including looking through wills, speaking to family, friends or colleagues to work out the personal circumstances of the deceased at time of death. However, the best solution without doubt is to keep pension nomination forms up-to-date – this will make the process much quicker and help to ensure that the money goes to the right family members.
Divorce Impacts Retirement Income
Changes in marital status, particularly through divorce, can have another more direct impact on pensions, in the form of reduced income.
Research by Prudential earlier this year found that people who have been through a divorce expect to receive an annual retirement income that is up to £3,000 lower than those who have never divorced.
“The financial impact of divorce can be devastating both in the short and longer-term, lasting well into retirement as divorcees experience expected retirement incomes of as much as 16% lower than those who’ve never divorced,” explained Clare Moffat, pension’s specialist at Prudential. “Deciding on living costs and childcare at the point of divorce is difficult enough, but a pension fund is likely to be one of the most complicated assets a couple will have to split in the event of a divorce.”
For expert legal advice on all aspects of family law, including the division of pension assets on divorce, contact our specialist family lawyers today. Fill in our enquiry form or telephone us on 0131 229 5046. We look forward to hearing from you.
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