Financial adviser support group Tenet has prompted its advisers to consider the changing face of bereavement allowance in the UK and why financial intervention is so important.

The Pensions Act will replace a number of benefits in the UK, including the Widowed Parent’s Allowance (WPA) with a single system of Bereavement Support Payment (BSP) from 6th April 2017. 

This has huge implications for a surviving spouse going forwards, in terms of both the level of benefit and the payment term.

For example, Tenet said that over a 15 year period, the level of benefit a widowed parent could receive pre-6th April was £89,789.*  This figure is based on a surviving parent being able to claim a lump sum of £2,000 and £112.55 per week (taxable) until the children were grown up

Post-6th April 2017, that figure drops by 89% to a maximum payment that can be claimed of £9,800, which is based on a lump sum of £3,500 and £350 per month  (non-taxable) for 18 months only.

Tenet has therefore reminded advisers of the increased importance of engaging with clients about their protection needs.

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In January, it launched a new range of protection support and tools to help ensure clients get the cover they need, which includes more specialist helpdesk support, a client-facing protection guide and other marketing support, and a more concise protection fact find and ‘demands and needs’ template.

Tenet also offers a referral service, where advisers can refer protection business to a dedicated specialist, retain ownership of the client and Tenet only advises the client on the areas of business specified.

Gemma Harle, TenetLime managing director, said: “For many years, successive governments have been a very benevolent insurer by providing nearly £6,000 per year through the widowed parent’s allowances. This is all set to change in April however and advisers have an essential role to play in educating clients and ensuring that they have suitable protection in place.”

GRiD view to bereavement allowance changes

Group Risk Development (GRiD), the industry body for the group risk protection sector, said the changes mean many families will be worse off, especially those with children where the current Widowed Parent’s Allowance is paid until such time as Child Benefit stops.

GRiD added that the Ministry of Justice is also abolishing the current fee structure for probate and introducing a new banded structure based on the value of an estate – meaning that many people will be hit by much higher charges than they expect.

Katharine Moxham, a spokesperson for GRiD said: “Group life assurance via the workplace has always played a valuable part in financially supporting dependants when a member of a family dies whilst in employment. However, we believe it is likely to become increasingly appreciated as families could now receive less in the way of state bereavement benefits, and are required to pay out more for probate.

“Crucially, in the event of the death of someone whose employer provides group life assurance, benefits are generally paid within a few days without the need for probate, which ensures that families are not left on the bread line or with immediate financial concerns.”

Moxham added: “Government has done very little to communicate to the public these changes to bereavement payments and probate. However, we would urge employers to consider discussing these issues with staff – those employers who already provide their staff with group life assurance will easily be able to alleviate any concerns they may have about these changes.”