Bob Champion: Widowed but prepared?

Bob Champion looks at the loss of a spouse in later life and urges advisers to help clients best prepare for the inevitable...

One of the most poignant comments I saw on the day of HRH Prince Philip’s death was that, after 73 years of marriage, the Queen faced the next day as her first as a widow.

Often long marriages evolve into a relationship of two props where the strengths of each support cover the weaknesses of the other.

No one will forget the sad pictures of the Queen, on her own, at the funeral last month. One can only feel great sympathy for a 95-year-old lady having to go through such an experience.

Of course, The Queen is not your usual widow. While little can help with the emotional grief she must be suffering, for other challenges of life she has much greater wealth and professional support than others.

The problems of losing a spouse in retirement are enormous. At the time, just when you face the emotional grief of losing that supporting prop, there is the potential for a number of financial problems to emerge.

Potential issues

Let us consider what those financial problems could be.

Firstly, not being the legal spouse. If the couple were not married, or in a civil partnership, the survivor may find they have little – or limited – rights to the estate of the deceased. This could result in them becoming homeless.

Death is inevitable. But often no consideration is given to how a funeral is going to be paid for. Funerals and wakes are often an important part of the grieving process for survivors.

Unfortunately, many of those who used their pension pots to buy annuities purchased single life pensions. That means the survivor will receive no top-up income to their state pension. How is the survivor going to manage on much-reduced income?

Consider also, that the survivor may not be entitled to a full state pension due to their National Insurance (NI) record, and the complex rules around inheriting a partner’s NI record for state pension purposes. Who is going to help them ensure they receive all they are entitled to from the state?

Many occupational pension schemes also have complicated rules around who is entitled to, and the amounts of, the survivor’s pension(s)? The reduction in income may be far greater than anticipated.

The survivor may therefore be entitled to Pension Guarantee Credit and other state benefits. Who is going to help them with the claim? There are over one million people in the UK entitled to Pension Guarantee Credit who do not claim it – many are older widows.

Also, the survivor may have cognitive problems. Are appropriate Powers of Attorney in place? The deceased may have been an unpaid carer with the survivor now needing support and care. Who is going to obtain local authority support if available, and source the care services that are required? How will this care be paid for?

Having got over those hurdles, is there sufficient income to live off? The romantic notion, that two can live as cheaply as one is not correct. If you are looking for a rule of thumb, statisticians work on the basis that two people living together require 150% of the income of a single person. In reverse, that means the survivor is going to need 75% of the couple’s income to maintain something like the previous standard of living. As can be seen, there may be many reasons why the survivor’s income may not come close that.

The death of Prince Phillip was well prepared for by the Royal Household and media. Apart from the pandemic interfering with the planned funeral arrangements, most of the newspaper supplements just had to be quickly dusted off, reviewed and published. Courtiers knew what was expected of them. The only unknown was the Queen’s emotional wellbeing.

Most people are not that well prepared. Wills may not have been updated, if they exist at all. Few have any idea of what income will be received after the death of a partner. Poor financial decisions are often made when financial shocks occur at the time when the persons involved are at their emotional weakest.

Do your later life customers know what to anticipate when the inevitable occurs? Have they made appropriate preparations and know who to turn to for assistance? While they will not be able to get to a level of preparedness the Royal Household had, they should with your support be able to remove many of the financial shocks the surviving spouse and their family would otherwise be faced with.

Bob Champion is chairman of the Air Later Life Academy