Support for bereaved families fallen by £41m every year
Every year, thousands of families lose a parent, husband or wife, leaving them both devastated and also in many cases having to adjust to a completely different standard of living.
Households often drop from two incomes to one and bereaved parents become the sole breadwinners for themselves and their children.
The government provides a financial lifeline in these cases, issuing payments to affected families from the National Insurance contributions of the deceased.
However, the amount of money issued in bereavement support has been falling by around £41million on average every year since 2003, This is Money can reveal.
Support: Bereavement payments can help families with the initial costs such as paying for a funeral for a loved one
The decline in payments has meant a saving of more than £5.2billion on what would have been paid out if support had stayed at the same level since 2003.
Despite the savings, thousands of new widows in future are set to see their payments slashed from April, with some losing out on tens of thousands of pounds.
The government predicts that the changes will cost it around £45million in the first two years. However after that, costs are set to fall even further, by around £21million every year.
Families bereaved before the changes are introduced in April will not be affected.
According to the government, the reforms are not designed to save money, but instead are a ‘modernisation’ of an old system.
A DWP spokesman said: 'The old system – introduced more than 90 years ago – was based on the outdated assumption that a widowed parent relied on their spouse for income, and would never work themselves. This doesn’t reflect people’s lives today.
Total costs have been falling, according to figures from the National Insurance Fund
'The new Bereavement Support Payment restores fairness to the system and focuses support during the 18-month period after a loved one dies, when they need it the most. It is also easier to claim, won’t be taxed and will be subject to a disregard for benefit claims, helping those on the lowest incomes the most.'
Despite the claims that plans to cut back benefits for widows are not designed to save money, the Department for Work and Pensions has predicted that it will save around £100million every year from its budget.
Reforms will cost £45million over the first two years, after which costs will steadily fall. There will be an additional spend of £79million a year on Universal Credit, but even so, the net saving will amount to £21million a year, government documents show.
The Work and Pensions Select Committee last year urged government to use some of the cost savings to extend support to children who lose their mother or father where their parents were not married, but the government has so far declined.
Savings have averaged £41million a year since 2003, according to This is Money calculations
Despite ‘modernising’ the system, the children of unmarried couples will still not receive support. The government estimates that extending support to cohabiting couples would cost £75million a year in the first four years. However extending them just to families with young children would cost considerably less.
Alison Penny of the Childhood Bereavement Network commented on the changes: ‘The sad truth is that the brunt of these cuts will be borne by the next generation of young children grieving the death of their mum or dad.
‘Those parents will have paid into the National Insurance system in good faith, but in 75 per cent of cases, the children and widows/widowers they leave behind will get less support than under the current scheme.
‘We ask the Government to reconsider their plans, and to work with us and others to find a way to secure a better future for more widowed parents and their children.’
Why will the cost of payments fall?
The government is planning a complete overhaul of the current bereavement payment system. You can read more details on this here.
The changes mean that in general higher payments will be made upfront, but paid for a shorter period of time.
Those eligible currently receive a tax-free lump sum worth £2,000, which is set to increase to £2,500 for those without children and £3,500 for those with children. This will push up upfront costs.
However other benefits that are currently made for up to 20 years will now be limited to 18 months. Existing claimants will not be affected, but will naturally cease to receive the benefit with the passage of time. The changes mean the cost of these benefits will fall overall in time.
Why have payments fallen already?
There is likely to have been a small decline in bereavement payments paid out due to some general improvement in the health of the nation, with fewer people smoking, fewer doing manual labour, etc. A decline may also have come from the proportion of married couples falling in favour of those who are not married but cohabit.
However, a big reason for the fall are cuts phased in in 2001. This is Money asked former pensions minister and director of policy at Royal London Steve Webb to explain.
He said: ‘Prior to 2001 if you were a childless widow aged 45 or more at the time of the bereavement you could in theory get a widow’s pension ‘until you retired’. In other words, there was no real time limit. Under the 2001 changes, the new bereavement allowance stops after just one year.’
He added that in some ways the benefits became more generous at this time: they were extended widowers as well as widows and the lump sum given to the bereaved spouse immediately following the death was doubled from £1,000 to £2,000.
However, even so, the net effect was a significant cut.
This fall has been working its way through the system, because those who were already on the widow’s pension did not have it taken away from them – the new rules only applied to new widows after 2001.
Steve Webb added that some of the cost savings should be used to find the money to extend benefits to bereaved parents who lose a partner to whom they were not married, ‘who paid the same National Insurance as everyone else and whose only crime is that they weren't married to the person who died.’
The Department for Work and Pensions says: ‘Marriage and Civil Partnership confer legal rights and responsibilities on individuals that cohabitees do not have.
‘Allowing the surviving members of cohabiting couples to have access to bereavement benefits would significantly increase complexity and require extensive proof of cohabitation which could be both difficult and intrusive for the bereaved person to establish. For example, this would require the Government to provide a legal definition of a ‘couple’, including determining the period the individuals had been together to be classed as a ‘couple’.’
A landmark case won at the Supreme Court last year may put pressure on the government to extend payments to children who lose their mother or father where their parents were not married.
Denise Brewster challenged a ruling that she was not automatically entitled to a ‘survivor’s pension’ as she would have been, were she married to her partner when he died.
Ms Brewster, a lifeguard from Coleraine, Northern Ireland, and her partner Lenny McMullan had lived together for ten years and owned their own home.
They had got engaged just two days before Mr McMullan died.
Five Supreme Court justices unanimously ruled she is entitled to receive payments under the pension scheme.