According to recent research, 21% of cohabitees believe that they would automatically inherit the final salary pension of a deceased partner.
However, the data from Aviva revealed that this may not necessarily be the case. Although some schemes do allow unmarried partners to be a beneficiary, they will need to nominated by name on a relevant form. For a third of cohabitees, however, no nomination has been made on their pension, with 6% being unsure whether they had or not.
In recent years, the number of couples cohabiting has grown to 3.3 million and accounting for 17% of all families. This is in comparison to just 9% twenty years ago.
Compared to married couples, the law surrounding cohabitation is much more unclear, with uncertainty spanning the majority of legal areas, from property to wills and probate.
19% of cohabitees feel that upon the death of a partner they should be entitled to bereavement allowances or some sort of benefit. However, soon to be implemented legislation will confirm that this kind of financial allowance will not be available for cohabiting couples.
Where pensions are concerned, however, rights for cohabitees may improve following a recent Supreme Court judgement. It was held that a woman could have access to her late partner’s pension, despite the fact they were unmarried.
Currently moving through Parliament, the Cohabitation Rights Bill will give certain protections to cohabitees. However, Aviva believes that it is likely to be implemented any time soon.
18% of cohabiting couples believe that they are eligible for the same Capital Gains tax exemptions which apply to those that are married or in a civil partnership. 15% also believe, incorrectly, that assets can be left to their surviving partner without Inheritance tax being owed.
Due to the lack of clear legislation surrounding cohabiting couples, it is advised that an arrangement is made to give financial protection in the event of relationship breakdown. However, the research indicated that only 4% of cohabiting couples have done this.
Commenting on the findings was Paul Brencher. The Managing Director of Individual Protection at Aviva UK commented on the lack of clarity surrounding cohabitation and the need for all couples to plan for their future.
“Many couples in the UK are choosing to marry later or not at all. But cohabitees do not enjoy the same financial benefits as those who are married or in a civil partnership.
“What is particularly concerning is the extent to which some cohabitees falsely believe they are entitled to the same benefits as those who are married. Such confusion has the potential to cause significant financial stress should their family experience an unexpected change in circumstance.
“Though it is welcome that more rights are on the horizon through the Cohabitation Rights Bill, cohabiting couples should take the time now to better understand their financial situation in order to plan effectively for the future. We must strive to create a mind-set among all UK family types that proactively planning for the long-term is important not just for those who are married but for all those who want to enjoy a comfortable future without the fear of financial uncertainty.”
