Does our large age difference mean that I may not inherit my husband’s pension? STEVE WEBB replies

My husband and I have been together for almost 40 years, although there is a significant age difference between us.

He is now in his early nineties and I am in my late sixties, and the specter of ill health always worries us.

We tried to find out more about his and my pensions.

I have recently received my state pension, but only receive around £540 a month as I have spent the last 10 to 12 years caring for my husband, who has had cancer twice.

He has a full pension based on about 40 years of contributions, which is worth about £940 a month, and a company pension of about £500 a month.

His company pension people say that I may not be eligible for part of his pension because I am over fifteen years younger than him, and that it ‘depends’ on the situation after his death.

Would I, as a widow, also be entitled to something from his state pension?

It’s a terrible situation to be in as I was always the breadwinner for all those years together and used property as my retirement pot.

However, when he became ill, money had to be put into it and almost twenty years later there is not much left. We now also rent.

I never thought I would ever find myself in this situation. Can you give any advice?

Steve Webb replies: I can understand why financial planning is difficult if you do not know how much company pension or state pension you would receive if your husband were to die before you.

While these are difficult things to think about, I would encourage every couple to figure out how they would be positioned financially after the death of one partner.

Starting with your spouse’s occupational pension, most traditional ‘final salary’ occupational pension schemes pay a pension to the surviving spouse.

This is usually paid at 50 percent of the full pension, although some schemes have more generous benefits than this.

When your husband contacted his scheme in 2022, it was confirmed that a 50 per cent partner’s pension would be paid, but then rather unhelpfully said: ‘Please note that this amount will be reduced if the partner is more than 15 years younger than you.’

Naturally, this leaves you in the dark and wondering if you would get anything at all.

It may seem a little strange that arrangements would care about the age difference between the members of a couple.

The reason this matters to them is that they need to set aside money to pay the expected liabilities of the plan. This includes not only pensions for participants, but also pensions for any surviving spouses.

If the spouse is much younger than the member, he can expect to receive a pension for much longer (albeit at the 50% rate).

To adjust for these additional costs, they can make a reduction, and in this case the scheme does so if the gap is more than fifteen years.

When I contacted the scheme on your behalf, it said that the reason it had not given you a final figure was that the exact reduction will depend on the actuary’s judgment at the time.

But to help you with this, she has now published an estimated figure showing that she will deduct just over a quarter of the pension you would otherwise receive, leaving you with just over a third of your husband’s current pension.

Now looking at your AOW benefit, the difference in your age means that your husband was under the ‘old’ AOW system (he had reached retirement age before April 2016) and you were under the ‘new’ system (which had only recently reached retirement age).

If people fall on either side of this line, there is a very useful page on the gov.uk website that tells you how the rules work.

This can be found here: Your partner’s Basic Insurance File and your AOW.

In your case you have a relatively low ‘new’ AOW pension.

Unfortunately, you told me that you did not apply for healthcare benefits during your years as an informal caregiver.

This would have provided you with ‘credits’ for your AOW pension all these years, but unfortunately it is now too late to change that.

If your spouse were to die before you, your state pension would not be affected, but you could inherit part of any additional state pension (Serps/State Second Pension) that your husband has built up.

But since he had a company pension, which was probably ‘outsourced’ by Serps, his additional state pension could be quite modest.

The exact percentage you can inherit depends on his date of birth. You can find the different rates here: Inheriting an additional state pension.

In your case, since your spouse was born before October 1937, you will inherit 100 percent of any additional state pension your spouse currently receives.

Moreover, if he accrued a ‘pension benefit’ for his work in the 1960s and early 1970s, you will inherit 50 percent of it, regardless of his date of birth.

I hope this is helpful in clarifying where you stand.

Did Steve Webb help you?

Steve Webb will publish his 500th column for This is Money in a few weeks, writes This is money.

It’s a double celebration because earlier this year he celebrated his 10th anniversary as our uncle with retirement pain.

Have you written in the last ten years and gotten a response from Steve that has helped with your finances? Or do you remember a column in which you learned something important that made a difference to you personally?

One of Steve’s most memorable achievements was discovering that over a hundred thousand older women were underpaid by around £800 million in state pensions. Were you one of those affected by the scandal, what did it mean to you and how did you spend your payout?

We look forward to hearing from you. Write and tell us your story pensionquestions@thisismoney.co.uk. Please put BIRTHDAY in the subject line, and we may publish some of your posts (anonymously) in a special section when Steve reaches his 500th column milestone next month.