In April, the Bereavement Support Payment was introduced, replacing the Bereavement Payment, Widowed Parent’s Allowance and Bereavement Allowance. Intended to provide a more streamlined benefit, the net gainers of this benefit are those under 45 with no children, with the losers of this new payment those with children, particularly those with younger children. According to the authors of a new Institute for Policy Research (IPR) Policy Brief recently released, 88% of working widowed parents will be worse off than they would have been under the old scheme, with 91% supported for a shorter time.

Support for widowed parents and their children was introduced almost a century ago. Since then, the system has been through a series of changes including extending eligibility to men as well as women, and more recently to civil partners. In 2011, the government embarked on a much more fundamental programme of reform.

The old scheme, based on the National Insurance record of the person who died, provided to spouses and civil partners:

• Bereavement Payment (BP): a tax-free lump sum of £2,000.
• Widowed Parent’s Allowance (WPA): taxable weekly benefit of up to £113.70 per week paid until the youngest child no longer qualifies for Child Benefit, the claimant remarries or moves in with a partner, or the claimant reaches state pension age.
• Bereavement Allowance (BA): taxable weekly benefit of up to £113.70 per week paid for 12 months to a surviving spouse or civil partner with no dependent children and aged between 45 and state pension age.

Widowed parents were treated differently from those without children, in recognition that ‘bereaved spouses with children may have greater difficulty in supporting themselves through work compared with those without dependents, because of their childcare responsibilities’.

Under the new scheme, those who are currently claiming WPA or BA will remain on it, but for those whose husband, wife or civil partner died on or after 6 April 2017, the new system of Bereavement Support Payment (BSP) provides:

• A tax-free lump sum of £2,500 to those without children and £3,500 to those with children.
• Monthly tax-free payments for 18 months of £100 to those without children and £350 to those with children.

The reforms represent a redistribution of support from those with children to those without children. Royal London has calculated that under the old system, a bereaved parent could have received a maximum of £119,338.40 if the youngest child was just one-month-old at the time of claim. Whereas, under the new system, the same individual would receive just £9,800.

Alison Penny Coordinator of the Childhood Bereavement Network states that it seems the main group of gainers under the changes are those aged under 45 with no children, who receive monthly payments for the first time, and those aged over 45 with no children whose payment period has been extended from 12 to 18 months. The main group of losers are those with children. 91% of parents with dependent children will be supported for a shorter time than they would have been under the old scheme, and 75% of them will be worse off in cash terms. This rises to 88% of those who are in work.

The IPR Policy Brief notes that last year around 600,000 people died in the UK and after a death 58% of people bereaved of a partner report lower levels of household or disposable income. Yet despite the scale of the issue, the authors reflect that for too long sensitive issues surrounding death and dying have been “pushed into the long grass” and this lack of focus has led to a general ill-preparedness right across society in facing up to death and its social and economic consequences.

How could life insurance help?

If you have children, the financial impact of losing your spouse or civil partner could be significant. No amount of life cover will ever ease the grief of losing a loved one. However, it could take away some of the financial burden of coping afterwards – particularly as state benefits are only intended to cover the immediate costs and the recent changes mean that those with dependent children could now receive dramatically less in bereavement benefits.

A small amount of life cover could help cover funeral costs and provide a regular income to help you manage your ongoing costs.

At Essential Insurance, our experts can help by finding you a policy to suit your individual needs and so you are financially well prepared for the future. To get in touch call 0800 612 8005.

Credit: IPR Policy Brief September 2017, Death, Dying and Devolution. Edited by Dr Kate Woodthorpe Centre for Death and 
Society. Author, Alison Penny, Coordinator of the Childhood Bereavement Network.