Paul Avis, Marketing Director at Canada Life, discusses the new Bereavement Support Payment system that will be launched in April 2017.
Bereavement Payment, Bereavement Allowance and Widowed Parent’s Allowance will be replaced with a single Bereavement Support Payment for new claims from April 2017. The new system will focus support on the 12 month period immediately following the bereavement – Widowed Parent’s Allowance is currently paid until the youngest child leaves education. Age will no longer be a factor and National Insurance contribution conditions will be simplified to make entitlement easier to understand. Currently, bereavement benefits are considered when calculating entitlement to means tested benefits and both Allowances are included within the Benefit Cap. Bereavement Support Payment will not affect Universal Credit entitlement or be included within the Benefit Cap.
When a parent dies, families currently receive a one-off, tax-free lump of £2,000 and a taxable weekly benefit of £111.20 per week until the youngest child ceases to qualify for Child Benefit. From April 2017 the lump sum will increase to £5,000 (which may stop people crowdfunding funeral costs!), but the ongoing payments will be limited to £400 per week for just one year. It is estimated that 88% of working families will be worse off as a result. Support for bereavement has fallen by £5.2billion since 2003 and a further £45m will be saved by 2019.
So while State benefits are reducing for support, charges on death are increasing. Government has proposed a tiered system of probate fees in England and Wales based on the value of the deceased’s estate, rather than the current flat fee of £215 (£155 if a solicitor is being used). The new system would result in some paying as much as £20,000 for estates worth more than £2m.
Given the sharp rise in property values in many parts of the UK in recent years, many families could find themselves hit by higher charges after a loved one passes away. In all cases, the fee is in addition to any Inheritance Tax due. The changes aim to reduce the cost of running courts and tribunals, and raise £250 million for the Exchequer.
Insurers offer Group Life Assurance (GLA), and in addition to the financial benefits, most also offer Bereavement Counselling and Probate helplines, helping survivors to cope emotionally and practically with the death of a loved one. Death in Service, or Spouses’, Pensions can provide an ongoing income (in addition to lump sum benefits) for partners or the mutual children of the affected couple.
The first rule of insurance is to identify the need for it and as State benefits reduce, or charges for their administration increase, there is more need than ever for Group Risk products.