More than two million pensioners in the UK are benefiting from an inheritance rule that allows them to receive additional state pension payments following the death of a spouse or civil partner. According to figures obtained by pensions mutual Royal London, a significant number of retirees are seeing their state pension increase substantially, with more than half a million gaining over £5,000 annually.
The data, obtained through a Freedom of Information (FOI) request, revealed that in the 2023/24 tax year, around 2,027,440 pensioners received payments from an inherited State Earnings-Related Pension Scheme (Serps). Serps was part of the old state pension system, which enabled workers to build up an entitlement to extra state pension income, and the scheme remains highly beneficial for many pensioners today.
More than £5,000 extra per year for over half a million retirees
Among those receiving inherited Serps payments, approximately 541,760 pensioners were gaining more than £5,000 annually, with a further 17,460 individuals receiving upwards of £10,000. The potential impact on retirement income is substantial, particularly for those who might otherwise be reliant solely on their basic state pension.
Under current rules, a surviving spouse or civil partner may inherit part of their deceased partner’s additional state pension entitlement. This payment is then added to the surviving partner’s own state pension upon reaching state pension age. The maximum amount that can be inherited for the 2024/25 tax year is £11,356.28 annually, or £218.39 per week. This represents a slight increase from the 2023/24 tax year, when the weekly maximum was £204.68.
Some retirees receiving over £20,000 annually
Due to these inheritance provisions, some individuals are now receiving more than £20,000 per year in state pension payments, significantly boosting their retirement income. On average, the annual inherited Serps payment for 2023/24 was £3,377, according to the Department for Work and Pensions (DWP). The figures, which were taken from the DWP’s quarterly statistical inquiry, were grossed up from a sample and rounded to the nearest 10.
The ability to inherit part of a deceased partner’s additional state pension can make a crucial difference to financial stability in retirement. However, experts warn that not everyone who is entitled to these payments is aware of the rules, meaning some individuals could be missing out.
Royal London warns some people could be missing out
Sarah Pennells, a consumer finance specialist at Royal London, highlighted the importance of understanding these inheritance rules, as many pensioners may not be claiming what they are entitled to.
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“This data shows how much of a difference inheriting a Serps pension from your husband, wife or civil partner can make,” she said.
“The worry is that, while more than two million people are claiming inherited Serps, others could be missing out. Understanding the rules is key to boosting your retirement income.”
Since the introduction of the new state pension system in 2016, there has been a shift towards individual entitlements, with less emphasis on inherited pension rights. However, many retirees who were part of the old system before 2016 still have valuable entitlements that could significantly enhance their pension income.
Pensioners advised to check their entitlements
Pennells urged those who are uncertain about their rights under the Serps inheritance scheme to take action.
“As we continue to adapt to the new system introduced in 2016, which focuses on individual entitlements, understanding the legacy of Serps and its relevance for thousands of retirees remains crucial,” she explained.
“If you’re in doubt about your inherited Serps entitlements, then you should contact the Pension Service to find out what you should be receiving.”
With the rising cost of living and increasing financial pressures on pensioners, making the most of available pension entitlements is more important than ever. Ensuring that those eligible for inherited Serps payments are fully informed and able to claim what they are owed could provide much-needed financial security for many retirees across the UK.
