Call for benefit reform for the unmarried

Pensions company 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 £82m “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 £15m a year in bereavement payments, £11m a year in bereavement allowance and £56m a year in widowed parent’s allowance, adding up to a total estimated yearly loss of £82m.

But the Department for Work and Pensions (DWP) said while it is looking at reforming the system, proving cohabitation would be “extremely complicated”.

A spokesman said: “We are modernising bereavement benefits, introducing a simpler and fairer scheme that will better assist people in what can be an extremely difficult time.

“Proving cohabitation following a bereavement would be extremely complicated, open to interpretation and can lead to additional burdens to claimants. But other financial support including funeral payments is available to cohabitees.”

The report went on to say that other parts of the benefit system, such as housing benefit, do take account of cohabitation - but only to reduce people’s entitlements.

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.

“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.”

Meanwhile, a separate report for Asda, compiled by the Centre for Economics and Business Research (Cebr), has shown that families were £13 better off in December than a year ago - but acted cautiously over parting with their extra cash, a report has found.

The average UK household had a weekly disposable income of £194 last month, up 7.2 per cent on December 2014.

However, the annual growth figure was the lowest percentage increase in 14 months due to a weakening in wage growth and a slight increase in inflation.

Food prices fell by a modest 0.2 per cent between November and December, while fuel prices fell by 11.4 per cent year on year.