MPs back extended bereavement payments, highlighting need for simplicity and clarity on tax

The Fourth Delegated Legislation Committee debated the Bereavement Benefits (Remedial) Order 2022 on 24 January. Under the measure, the higher rate of Bereavement Support Payment (BSP), along with its predecessor, Widowed Parent’s Allowance (WPA), will be extended to surviving cohabiting partners with dependent children.

This order updates the current legislation, which only covered couples who were married or in civil partnerships, and will also include unmarried partners who were pregnant on the date of their partner’s death and will be available “irrespective of sexuality”. It follows input from the Joint Committee on Human Rights and the Low Incomes Tax Reform Group, which provided a briefing on the proposals.

Mims Davies, Parliamentary Under-Secretary of State for Work and Pensions, spoke on the order for the Government, saying while the WPA was introduced to provide financial support to bereaved partners with dependent children, the advent of Universal Credit in 2013 meant it was “necessary to look again at the whole package of bereavement benefits”. This led to a revamp which saw BSP introduced in April 2017.

The latest changes will be backdated to August 2018, with Davies acknowledging the “long gap” between proposal and implementation but stressing the importance of “getting it right”. She said: “It is important to recognise not only the time taken, but the amount of challenges that we need to balance against that. It is vital to get this right, and that remains the absolute focus.”

MPs debated the tax implications of a retrospective payment which would be awarded to claimants as a lump sum. They highlighted that while BSP is exempt from tax, WPA is not, and a large backdated payment of the latter could result in a sizable tax bill.

They also expressed concerns around the logistics of informing and processing the extra number of expected claimants for the benefit and the complexities the reforms would introduce, such as proving cohabitation or multiple people claiming for the same deceased partner.

Labour’s Karen Buck repeated concerns voiced by the Childhood Bereavement Network that payments would differ among the various types of claimants, unfairly disadvantaging some. She also mentioned the briefing issued by the Low Incomes Tax Reform Group, suggesting payments could be made either net of tax or with an amount reserved back for tax to reduce the risk of future high tax bills they are unable to afford.

Buck also said data compiled by the by the Childhood Bereavement Network suggests more than 20,000 extra parents could claim the benefit under the new rules, but many would be unaware they are now eligible.

She said: “That calls for a more imaginative approach that uses and supports the expert community and voluntary organisations, faith communities and others who may have been interacting with those bereaved parents at the time of bereavement.”

Buck questioned how applications will be made, amid concerns that those applying for WPA would need to do so “physically”, rather than via an online claim route. She said: “We are in 2023, and it worries me that we are relying on that system. The risk is that asking people to make a physical application could lead to some of them falling through the net.”

Conservative Michael Fabricant questioned why, in cases where more than one person claimed for the same deceased partner, an “absolute decision is made in favour of one person over another”, instead of the benefit being split across all involved parties. Fabricant also asked for confirmation that the extended order would apply to cohabiting same-sex couples.

Labour’s Tahir Ali joined Buck in requesting figures on the current take-up of the benefit and the expected take-up after the change comes into force, while Natalie Elphicke, Conservative, questioned whether it would be possible to submit retrospective claims on behalf of people who would have been eligible for the benefit from the backdated start date but have since died.

Responding for the Government, Davies echoed previous confirmation in the House of Lords that backdated WPA would be taxed. She said the two benefits will comply with existing tax rules, but WPA claimants will not lose any existing entitlement to income-related benefit if they receive a retrospective payment.

She said: “The payment of bereavement support payment does not affect a person’s tax credit entitlement. Widowed parent’s allowance will be treated as income for tax credit purposes, as is commonplace for social security benefits. It will be assessed in the year of the payment rather than entitlement, so no adjustment to past years will be needed for these claimants.”

Davies added the Government has a duty to protect “fairness” with means-tested benefits and common sense approach would be taken when considering the deprivation of capital rules as regards claimants’ use of their lump sum awards, provided the money is spent “reasonably”.

Addressing the issue of communication, Davies said those who may be eligible for tax on their allowance will be engaged with the ensure they are “fully aware” of any tax liability. She added that Self-Assessment claimants required to declare payments on their tax returns for each tax year or write to HMRC to include back payments on previous returns.

She also reassured MPs that the benefit will be easy to claim, saying: “We know from our evaluation that claimants have had a very positive experience of claiming bereavement support payment. We need to ensure that the next stage is easy for people who have waited, who are concerned and who have individual circumstances.”

However, Davies said that as WPA is a “legacy benefit”, which was abolished for new claimants in 2017, there is no online claim route and to introduce one now would be “disproportionate”. She said: “Instead, we found that ensuring we have an online claim form that is as simple as possible, with clear guidance, is probably the best and most straightforward way forward.”

Responding to questions on the number of new claimants that could be expected as a result of the reform, Davies said between 4,000 and 5,000 extra cases a year were predicted until 2025-26, with those who have unsuccessfully claimed before able to reapply. However, previous unsuccessful claimants will not be proactively contacted as their details are not routinely stored on databases.

In cases where more than one person claims for the same death, Davies confirmed that the benefit will be paid just once, “prioritising the person who was living with the claimant on the date of death”. She added: “In very rare cases, more than one potential claimant may have been living with the deceased on the date of death. Here, entitlement will be decided according to a hierarchy that is intended to reflect which claimant had the most established relationship with the deceased.”

If the benefit is already being paid to one person and a second, rightful claimant comes forward, payments to the first will be stopped, she added. However, the Government will not look to “claw back” any benefit already paid. She also rejected suggestions of splitting benefits, saying it would be “challenging for claimants to understand their potential entitlement before applying.” 

Davies said existing DWP IT systems would be used to determine cohabitation, though claimants may also need to submit two forms of evidence, such as a utility bill or bank statement. Customer declarations can also be made over the phone.

Davies thanked organisations including the Low Incomes Tax Reform Group, Childhood Bereavement Network and Widowed and Young for their “fantastic work in support of this change”. 

She said: “At its core the draft order aims to achieve something quite simple and very important—parity and fairness—to ensure that surviving partners with dependent children can access the same financial support as those who were in a legal union with their deceased partner.”

The order was agreed by the committee and then (without debate) by the House of Commons the following evening (25 Jan). It is now law.

You can read the committee debate in full here, and the order here.