Appendix
NOTE BY THE DEPARTMENT OF SOCIAL SECURITY
The Social Security (Inherited SERPS) Regulations
2001
The proposals
1. The Government proposes that from 6 October
2002, a new rule will apply on the amount of SERPS that a surviving
spouse may "inherit" on the death of their spouse.
2. The proposals are as follows:
- Nobody who is widowed before 6 October 2002 will
be affected by the new rule. They will therefore inherit up to
100 per cent of their deceased spouse's SERPS[13].
- If someone is due to reach state pension age
before 6 October 2002, when they die their surviving spouse can
inherit up to 100 per cent of their SERPS.
- If someone is due to reach state pension age
after 5 October 2002 but before 6 October 2010, when they die
their surviving spouse will inherit a maximum of between 90 per
cent and 60 per cent of their SERPS. The exact amount will depend
on when, in this period, the deceased person reached state pension
age.
- If someone is due to reach state pension age
on or after 6 October 2010, when they die, their surviving spouse
will inherit up to 50 per cent of their SERPS.
3. The table below sets out how the Government
proposes the new scheme will operate:
Max % SERPS entitlement for surviving spouse
| Date when contributor reaches state pension age
| Date of birth of contributor:
Men
| Women
|
100% |
5.10.2002 or earlier
| 5.10.37 or earlier
| 5.10.42 or earlier
|
90% |
6.10.2002 - 5.10.04
| 6.10.1937 - 5.10.39
| 6.10.1942 - 5.10.44
|
80% |
6.10.2004 - 5.10.06
| 6.10.1939 - 5.10.41
| 6.10.1944 - 5.10.46
|
70% |
6.10.2006 - 5.10.08
| 6.10.1941 - 5.10.43
| 6.10.1946 - 5.10.48
|
60% |
6.10.2008 - 5.10.10
| 6.10.1943 - 5.10.45
| 6.10.1948 - 5.07.50
|
50% |
6.10.2010 or later
| 6.10.1945 or later
| 6.07.1950 or later
|
4. The phasingin period overlaps at the end
with the start of the taper that leads to equalisation of state
pension age. This means that the 60% tranche will be the widowers
of those women who are 60 between 6 October 2008 and 5 July 2010
(rather than 5 October 2010). So the band is a few months narrower
for men than for women.
5. The percentages shown in the Schedule to the regulations
are different to the percentages in the table above. That is because
the percentages in the Schedule show the amount by which the inheritance
will have to be increased from the 50 per cent base in order to
produce the final figure in the above table.
6. The maximum amount of State Second Pension that
a surviving husband or wife can inherit will be 50 per cent.
Background
7. The reduction in the amount of SERPS which can
be inherited by surviving spouse from 100% to 50% is part of a
package of measures introduced by the Social Security Act 1986
to reduce overall expenditure on SERPS and was to come into effect
on 6 April 2000. It was designed to bring SERPS into line with
most occupational pension schemes, where it is usual for half
occupational pension rights to be inherited by a surviving spouse.
The reduction mostly affects widows. There will be some change
to this situation with the introduction of the new bereavement
benefit package.
8. However, information about the change did not
appear in DSS leaflets after 1986 until April 1996. People who
made specific enquiries about how much pension their spouse would
inherit on their death were sometimes told they could inherit
all of it without it being pointed out that if they died after
the 5 April 2000 different rules would apply.
9. No one has yet suffered financial loss, because
the change was not due to take effect until 6 April 2000 and has
now been postponed until 6 October 2002.
The purpose of the change
10. The purpose of the change is to reduce the amount
of SERPS that can be inherited from a maximum of 100 per cent
to a maximum of 50%, but in a way which is fair and allows people
sufficient time to make appropriate plans for their future.
The impact of the change
11. The change will mean that:
- Noone who is a pensioner now will be affected.
- Noone who reaches state pension age before
6 October 2002 will be affected.
- People who reach state pension age between 6
October 2002 and 5 October 2010, will only be able to leave between
90% and 60% to their surviving spouse, reducing on a sliding scale.
- People who reach state pension age on or after
6 October 2010 will only be able to leave up to 50% of their SERPS
to their surviving spouse when they die.
Timing
12. The intention is to lay the regulations before
Parliament in the new year.
Costs
13. The total costs over 50 years will be £12
billion.
Numbers affected
14. The package will provide protection for over
one and a half million widows and widowers over the next 10 years.
13 We talk in terms of "up to X%" because
when adding together a person's own SERPS entitlement and inherited
amount of SERPS, the sum cannot be more than the prescribed maximum
payable to a surviving spouse. Back
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