If I enter a civil partnership with a close friend will this affect her state pension? Steve Webb replies

By STEVE WEBB, PENSIONS EXPERT AND COLUMNIST, THIS IS MONEY

Updated: 04:53 EDT, 20 December 2021

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My close friend of many years and I share our lives and have left everything to each other in our wills.

My friend is 73 years old and became entitled to her state pension at age 60. The amount was calculated using her ex- husband’s NI contributions. They divorced in the 1970s.

I am 68 and am drawing a state pension in my own right. We are considering the benefits of contracting a civil partnership but have concerns about whether this will affect the amount of my friend’s state pension.

Will it be altered by a civil partnership and will any subsequent death benefits be affected? No one seems to be able to advise us about this. Thank you.

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Financial planning: If I enter a civil partnership with a close friend will this affect her state pension?

Steve Webb replies: I receive a lot of questions from people asking how changing their relationship status in later life will affect their state pensions and benefits, so I will cover your specific situation as well as answering more widely.

The first thing to say is that for most practical purposes, registering a civil partnership is treated by the Government as the same as getting married.

Civil partnerships were originally available for same sex couples but have recently been extended to cover opposite sex couples, and provide a way for a couple to register their relationship without going through the marriage process.

I see that your friend was divorced when she reached pension age, and that she comes under the ‘old’ state pension system.

Under that system, if someone was divorced when they reached pension age, their state pension could be calculated on the basis of their ex-spouse’s NI contribution record up to the date of the divorce.

This should already be happening and should be helping to boost your friend’s state pension entitlement.

The good news from her point of view is that, even if she were to marry or form a civil partnership, her state pension would continue to be paid at the same rate as before.

You also ask about the issue of death benefits.

For a divorced woman, such as your friend, the way the old system works is that she has been benefiting in full from the NI contributions of her ex husband in terms of her basic state pension since she first started drawing her state pension.

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There is therefore nothing further to inherit when he dies. This does not change if she were to now form a civil partnership with you.

A further point to be aware of is that under the rules of the old state pension system, those who married or formed a civil partnership post retirement could potentially gain new death benefits from their new partner.

However, for those who come under the new system, these provisions only apply to those who married or registered a civil partnership before the rules changed on 6 April 2016.

This means your partner can still get derived rights from you as her new civil partner, but you cannot benefit as you come under the new system and formed a civil partnership post 2016.

Some people on a lower income might also need to think about how their choices could affect any benefit that they receive such as pension credit or housing benefit.

In the case of means-tested benefits, what matters is not whether you are married or in a civil partnership but whether you form a single household or not.

You mention that you share your lives and if you already live together then the benefits authorities would already treat you as a couple regardless of your formal status.

But if you were planning to move in together alongside forming a civil partnership then you would now be treated as a couple and your joint income would be used in any assessment for means-tested benefits.

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Steve left the Department of Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock.

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