Bereavement payments receive a controversial overhaul

Posted by Sophie Regester in Personal Finance on 10 February 2017 - Sophie is a Senior Credit Analyst at checkmyfile.

The government is planning an overhaul of bereavement payments and allowances set to start from April this year. Currently the system is there to help those married with children who find themselves suddenly the sole breadwinner.

Couples who are unmarried currently receive no benefit from the system and will continue to be ineligible under the new plans, even if they have children to support. Married young couples without children will find themselves eligible for the first time.

The pay-outs are funded from the National Insurance payments the deceased made over their lifetime, they make up a monthly allowance to contribute to all the day-to-day necessities needed to run a household and to support the children. Under the old system the payments were ongoing until to youngest child left school, under the new system the bereavement payments will support the family of the deceased for 18 months after they pass away but after that they are on their own.

In monetary terms, the worst affected could be £31,000 worse off, with the average working widowed parent finding their bank balance down by around £12,000. Some will be better off, including of course widows and widowers with no children who previously received no support.

The changes are billed as a modernisation of a system originally created in 1925 when typically there would be one breadwinner, now that there is a higher potential that both parents will be working the new system steps in for only 18 months when the help is most needed.

Under the changes it will be easier to make a claim, which will not be subject to tax and will not impact on the receipt of other benefits, therefore giving additional help to those on the lowest incomes.

This all sounds jolly nice but if you consider the tens of thousands of pounds the deceased may have paid out in National Insurance that would have gone to their pension that they will no longer be claiming, you might argue that this should dictate when the payments should stop.

Someone should benefit from the payments made and given the time the deceased spent away from their family working and earning a crust, the family should possibly receive an allowance until their family member’s NI payment pot is exhausted. Most will be worse off under the new system, which will affect those bereaved after April 6th this year.

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