This Factsheet looks at the main issues about your marital status that YOU should be thinking about when it comes to retirement planning. It is designed to make you think about various aspects of your immediate relationships and how these could have a bearing upon your pension benefits.
Some of the points are more obvious than others, but they are all important, so take a while and think about you, your family and your immediate relationships.
If you are intending to get advice from a Financial Adviser these are the types of issues you should expect to be asked to consider (and often many more).
For information on children’s and dependants’ benefits see My Dependants.
Why is my marital status important in terms of my pension benefit?
Employer sponsored money purchase pension schemes provide more than a pension for scheme members. Additionally, benefits can be paid on the death of a scheme member and should anything happen to you, then your partner, children and dependants may be entitled to:
Benefits payable to your dependants on your death can be expensive and should not be overlooked in your pension planning.
Additional life insurance cover may be available with some employers (over and above what would normally be paid from the scheme), although this usually ceases when you stop being an active member of the scheme.
When making enquiries with your scheme make sure any benefits they quote are relevant to you as a preserved member.
What do Scheme Rules say about marital status?
Your marital status is important in your pension planning for a number of reasons, but not least because it will determine what, if anything would be payable in the event of your death.
Pension schemes will make reference to or define marital status within their Rules, and the definitions may vary considerably from scheme to scheme.
Some Rules have very narrow definitions and this could affect the amount of benefit that would be payable in the event of your death - and to whom.
Over time pension schemes may have changed definitions to take account of a more liberal social environment.
Civil partnerships must now be recognised by schemes and this has implications for break ups of these relationships in the same way as divorce settlements.
What categories of marital status are there?
You will be either single, married, separated or legally separated, divorced, widowed, an opposite-sex partner, same-sex partner, registered civil partner, or be separated or legally separated, dissolved or nullified civil partnership.
The term ‘common-law spouse’ has no legal status. Co-habiting with someone may not solely be sufficient for that person to qualify for benefits arising from your death.
What if my marital status changes?
Because your pension scheme may provide different benefits on your death depending on your marital status, it is important that you inform the scheme administrators of a change as soon as this is practicably possible. It is equally as important that you inform your advisers (Financial, Legal or other) so that they may consider what affect this may have on your financial affairs.
Depending upon what your pension scheme provides, your spouse or civil partner may be entitled to pension benefits on your death (such as a result of your scheme having contracted-out of the State Earnings Related Pension Scheme (SERPS), or its replacement, the State Second Pension, S2P).
Can I specify who gets what on my death?
The benefits available on your death will depend upon the Scheme although the administrators may have discretionary powers in certain circumstances, which they may or may not exercise. This will depend upon whether the scheme is subject to the rules of a Trust, which contains these discretionary powers.
Some schemes allow you to complete a Nomination form or Expression of Wish Form (or some similarly entitled document), so you can express your wishes regarding your beneficiaries. You should remember however, that the administrators are not necessarily obliged to take this into account in making their decision.
You should contact your pension scheme administrator as soon as there is a change in your marital status. If you have previously completed a Nomination Form (or similar document) which details what you would like to happen in the event of your death, this may need to be revisited.
If you have not completed a Nomination Form, get in touch with your pension scheme, as this type of document helps the administrators to know what your wishes are.
Keeping your scheme appraised of changes could save considerable heartache or even prevent unnecessary financial difficulty for the person or people you wish to protect.
Why is my partner’s age important?
If you are in a relationship your partner’s age will have a bearing on any benefits payable on your death.
This is because where there is a survivor’s pension payable on your death; your spouse’s age will determine the amount of benefit payable. The older they are, the more they will receive and the younger they are, the less they will receive.
I’ve recently got married / entered into a civil partnership. What should I do?
Inform your pension scheme (and your advisers) so they can record this and review your financial planning so that you can make adequate provision for your new partner’s benefits. You may not be able to use any of your current schemes to make the extra payments but a wide range of solutions can be offered by a financial adviser.
Your scheme might require proof of your marriage or civil partnership for their records.
Summary & Key Points
When making enquiries about your preserved benefit it is very important that you make it clear that you are a preserved member rather than an active member or pensioner member. Active, preserved and pensioner are different classes of membership of a pension scheme and any definitions and paragraphs contained within your Scheme Rules or scheme literature relating to any benefit may differ considerably between these categories.
On average, people change jobs every 5 to 6 years. It is possible therefore, that you will have more than one pension benefit. For each pension benefit, you need to consider the following items:
- Why your marital status is important in terms of your pension benefit.
- If you have a partner, whether he/she will receive benefits from your pension scheme on your death before or during retirement?
- Have you kept your pension scheme informed of any changes to your marital status?
- Have you completed and returned to your pension scheme a Nomination Form (or similar document) in respect of death benefits?
- If your partner is much older or younger than you, have you investigated what effect this would have on the death benefits?
- Keep informed. Your scheme may modify benefits and Rules. Legislation may change. Your circumstances may alter.
- Money purchase schemes have many forms and can be quite different from one another. Don’t assume that what applies to your money purchase schemes will necessarily apply to other pension arrangements that you may have.
- HMRC impose rules, which registered pension schemes must conform to.
People seldom have identical pensions and you should avoid drawing comparisons with colleagues whose circumstances may at first appear the same but could emerge as having significant differences.
This is not an authoritative document. Seek professional advice from an appropriately experienced and qualified adviser.
My Marital Status v2.2 Preserved MP
Last updated 10/07/2007