Changes to widows’ pension rights - not just a 'Thai Bride' problem

There was an article in one of Thailand’s main newspapers last month about what the paper described as the UK government’s attack on foreigners receiving a British state pension whilst living abroad.

Under the headline “Thai widows to lose their pensions” attention was drawn to the 2,000 or so women living in Thailand who had British husbands and who would henceforth no longer be able to receive a state pension based on their husband’s national insurance record or a widow’s pension on the same basis in the event of his death.

"This is not a nationality issue. The changes that will stop pensioners in Bangkok from getting a weekly cheque from Whitehall will have the same effect on their counterparts living in Birmingham, or anywhere else in the UK for that matter."

The article did make it clear that those women already in receipt of a UK state pension or those whose husband died before the cut-off date last month still fall under the old rules and would continue to benefit but that Thai women now contemplating marriage to a British national would not be able to inherit any of their husband’s state pension rights.

Impact of the new state pension

This is because, of course, the introduction of the new single-tier state pension with effect from April 6, 2016 has brought about a change in the former arrangements which allowed a person in a marriage or civil partnership to claim the state pension based on the national insurance (NI) record of their spouse. Since last month, only contributions made into the new system by the individual herself (or himself) can normally count towards building up an entitlement.

This is not a nationality issue.  The changes that will stop pensioners in Bangkok from getting a weekly cheque from Whitehall will have the same effect on their counterparts living in Birmingham, or anywhere else in the UK for that matter.

So why is this change being made now? How many of our own indigenous population are going to be affected and how much of a problem might this turn out to be over the longer term?

Building entitlements

Well, the government seems to think that with changing lifestyles and the continuing availability of NI credits  most women are now capable of building up their own state pension entitlements and do not need to rely on claiming a pension from their husband’s record.

That may or may not be broadly true but there will certainly be some who fall by the wayside here and the government could well be on the receiving end of some strong criticism as a result of their policy switch as part of the new state pension. Being seen to deprive a widow of a pension is always going to be a sensitive issue and could, in my view, generate some very bad publicity for the government as individual cases of hardship come to light, as they inevitably will do before very long.

Let’s take a simple example to illustrate the point.

Under the pre-6 April 2016 rules a pensioner couple where the man has a full basic state pension and his wife little or no pension in her own right is guaranteed a total pension income of £190.80 per week (£119.30 + £71.50). Under the single tier the man has a pension of £155.65 a week and unless his wife can meet the new minimum of 10 NI qualifying years in her own right she will get nothing. Effectively they are likely to be over £25 a week worse off.

Left penniless?

And in the event of the husband pre-deceasing his wife, under the old system the widow inherits the whole of his £119.30 pension, plus half of any SERPS he may have. Under the new system the widow gets nothing and could be left penniless and forced on to means-tested benefits for the rest of her life.

This is clearly not going to be easy to explain or justify in the context of a new state pension regime which the government has proclaimed as being better for women and the low paid.  It may not be just the Thai press that is expressing concern about the application of this particular policy but in due course from sources much closer to home.

This article originally appeared in Professional Pensions