Pensions cuts for dependents

A rule change under the Adult Dependency Increase (ADI) will mean that thousands of retirees could lose a combined £33 million in state pension benefits from April this year.

The ADI is typically paid for a partner who is below state pension age but is financially dependent on someone receiving the basic state pension. However, the Government is set to end the allowance in April, meaning that those who rely on it will see a drop in their pension of up to £70 per week.

The extra payments closed to new applicants in 2010 but anyone who was already receiving it at the time was permitted to continue claiming for it as long as they were entitled. A Freedom of Information request has now found that all payments will stop as of 6 April.

Former Pensions Secretary Sir Steve Webb commented that under the old state pension system, people claiming a retirement pension could get a significant extra amount for a spouse who was financially dependent upon them.

He added that it will come as a shock to thousands of people to see their state pension cut by up to £70 per week and described the Government’s move as “penny-pinching”.

However, a spokesperson for the Department for Work and Pensions (DWP) stated that the ending of ADIs was part of a package of reforms introduced in 2010, which meant that overall more women received the full basic State Pension and more generous National Insurance credits for carers were introduced.

The spokesperson added that after 6 April 2020, current ADI recipients may be eligible for a means-tested benefit such as Universal Credit or Pension Credit and said that those already in receipt of a means-tested benefit should see no change to their income as the loss of the ADI will be offset by an increase in their means-tested benefit.

Steve Horton, Financial Services Partner at Milsted Langdon Financial Services, said: “It’s important that anyone who is affected by the rule change to ADI, which comes into effect in April 2020, is aware of the potential impact, as many are set to see a cut in their state pension. While the extra payments closed to new applicants ten years ago, the rule changes will still affect many savers in the UK.

“For help and advice on matters relating to financial services, including pensions, contact our expert team at Milsted Langdon today.”

Posted in News.