Avivah Wittenberg-Cox

Below’s a really good post which I’ve learned from. It ties in with some thinking that has been done with Neil Walsh of Prospect and helps me and friends wishing to provide collective pensions from next year.

It ties in too with the impending launch of the pension dashboard by MaPS, hopefully next year too.

Let’s start with the pension dashboard.

It’s the dashboard  that men and women, husbands and wives , partners whether of different or the same sex are going to be able to see  their pension entitlements. They are will be able to see pensions to be paid on their phones and while they won’t have joint dashboards (yet) , people will be able to make comparisons using two screens.

They will be able to compare their state pensions; increasingly these aren’t inheritable; they belong to each and though there will be some spouses pensions payable for a while. The new state pension will be discreet to each partner in the relationship. The pension dashboard will show the income payable to the person who’s “earned” it, not to the inheritor, state pensions in payment (inherited or not) will not show on the dashboard.

There will be DB pensions that will pay an inheritable pension to the legal spouse and sometimes the partner.  But here there looks like big issues for those who didn’t earn the pension, losing their rights when there is divorce, they can be disinherited and not rewarded for the loss of a shared pension if the partner lives or dies and leaves it to someone else. The dashboard will show the pension payable to the person who’s earned it but not the right to the spouse/partner.

Then there are DC pots , not yet being paid through guided retirement defaults or crystallised but showing on the pension dashboard as income payable from a theoretical annuity paid without increases. This level income  is quite unlike what is paid by the State or by the DB or CDC pension (I know that some people sold their increases as part of the “de-risking” craze which thankfully is over). It’s unsatisfactory but a step better than showing the pot – certainly for illustration of what’s coming.

Annuities , DB or State pensions in payment will not show on the pension dashboard but people are pretty aware of what they are getting as a wage for life. Most people, in line with the dashboard retirement income (ERI) will not have chosen an increase on pensions and more pertinent to this blog, a spouse or partner’s income on early death of the person buying the annuity using money from their pot.

Finally, there are collective pensions (CDC) where there is no rule about who gets what when the person receiving or planning to receive a pension dies. There is no rule but this is where collective pensions can be strong and protect spouses and partners.

We, as a potential provider of collective pensions want spouses and partners to be assured of income if their partner dies and will make this the  default. You will not get more pension if you nominate no partner and we don’t expect there to be much exploitation of this, payments will be paid to nominated beneficiaries as administrators do with DB  – needing some evidence.  CDC pensions , will show as what is likely to be paid but will not show on the pension dashboard when in payment.

Complicated but the dashboard will get you to first base

Not every household has the man with more pension entitlement than a woman. There are households like mine where the women has more than the man and there are same sex marriages where either could be richer in income in retirement. I like this statement from Avivah.

Perhaps one of the more romantic things you can do for someone you love is make sure they can afford to grow old – without you.

Working out the rules governing inheritance of pensions (or of pots and annuities) needs getting the instruction books from the providers, from the administrators of the pension trustees and maybe the help of a paid or unpaid adviser.

Avivah’s thinking is brilliant;  in pointing out that if people understood what would happen if they divorced, maybe they’d divorce more fairly, maybe they wouldn’t get divorced.

If people knew what happened if they swapped their pot for an annuity, maybe they’d pay more attention to the type of annuity they bought, maybe they’d encourage the decision to be “a joint decision” as good brokers (like Retirement Line) do.

Moving from a wage from work to a wage in retirement.

When you get to the time when you are doing the sums on how retirement will work financially, you will of course be considering whether to still do some paid work and you’ll be thinking about tax or conversely, means-tested rights to pension credit.  All this builds on the information from the pension dashboard but should depend on a romantic wish to do the right thing for the other person in the relationship.

I’m  glad that Avivah posted what she did, I see she copied Richard Smith and others in.  Please share more- we all need to learn!