Unmarried cohabiting couples 'losing out on £82 million in bereavement benefits'

Unmarried cohabiting couples are losing £82 million a year collectively due to out-dated rules surrounding bereavement benefits, according to a pensions company.

A report from Royal London said the National Insurance system "ignores" unmarried couples living together, despite the fact that six million people in the UK are now cohabiting.

The £82 million "living together penalty" was estimated by looking at how much would have been paid in benefits to people whose partners had died if they had been treated in the same way as people who were married.

The calculation took aspects of the National Insurance benefits system which do not support cohabiting couples into account, as well as Office for National Statistics (ONS) figures for death rates and cohabitation rates.

The report covered three main benefits for people of working age who are bereaved - bereavement payments, bereavement allowance and widowed parent's allowance.

A bereavement payment, for example, gives a lump sum of £2,000 to someone whose spouse or civil partner dies.

The research estimates that cohabiting couples collectively lose £15 million a year in bereavement payments, £11 million a year in bereavement allowance and £56 million a year in widowed parent's allowance, adding up to a total estimated annual loss of £82 million.

The report said that other parts of the benefit system do take account of cohabitation - but only to reduce people's entitlements.

Income-related benefits such as housing benefit look at the income of a whole household when determining if a claimant has enough money, and for these purposes the income of a cohabiting partner is counted against the claim.

Former pensions minister Steve Webb, who is now director of policy at Royal London, said: "Many unmarried couples have been living together for many years and are financially dependent on each other.

"Yet at a time of bereavement the benefit system treats them as though their partnership never happened.

"This is despite paying the same National Insurance Contributions into the system as everyone else.

"When it suits the Government to treat two individuals as a couple it does so, but when it comes to paying money out the Government is happy to deny the existence of a relationship. It is hard to see how this double standard can be justified."