Survivors' Benefits - How to enter Widow's (Widower's) Pensions

Where you enter a widow's pension in Voyant will depend on whether this benefit is associated with and calculated based upon one's income (employment) or a final salary scheme. In some cases you may even be entering the details of a client who is widow or widower already receiving a widow's pension. 

Widow's pensions provide ongoing payments from an employer or a pension scheme to a surviving spouse. These payments might be based on the deceased's former salary or accrued or project pension benefits. 

This type of benefit is not to be confused with other types of survivor's benefits from final salaries that are deferred or in payment, nor are they the continued draw downs or annuity payments to survivors from a drawdown pension or annuity, or the sum payment provided from a death in service benefit. All of these options are set elsewhere in the software. 

Before entering a widow's pension, first consider the following questions. 

Option 1 - Is the widow's pension to be calculated based on your client's employment income (salary)? 

Option 2 - Is the widow's pension associated with an active final salary scheme -- one that is accruing, not deferred or already in payment -- and will payments be based on the benefits from that scheme?

Option 3 - Are you entering a case where a client is a widow or widower who is already receiving a widow's pension?  

 

Option 1 - Widow's pensions based on salary (employment income) 

To enter a widow's pension based on your client's salary:

1. Go to the Employment screen. 

2. Select the relevant income in the ledger, to the right side of the screen. 

- If you've haven't entered the income into the plan yet, enter the details in the fields center-left.

3. Click Advanced Settings > Death In Service / Widows Pension.

Note: This facility is not for entering a lump sum death in service benefit. Lump sum death in service coverage is entered on the Protection > Term & Endowment screen. Read more >>

4. Tick "Death In Service / Widows Pension Applies". 

5. Percent of salary %: Enter the percentage of your client's salary that will be paid to the survivor. 

- This setting assumes percentage of salary at time of death. If your client's income is being grown, as is set on the Employment screen under Advanced Settings > Growth), any growth in income up to time of death would be factored into the amount of these payments. 

6. Escalation %: Enter the annual escalation rate if payments from the widow's pension are to increase annually. 

7. Click OK and then Update (or Add) to save your changes. 

 

Option 2 - Widow's pensions based on benefits from an active (actively accruing) final salary scheme

To enter a widow's pension based on your client's active final salary (a pension that is accruing, not deferred or already in payment): 

1. Go to the Pensions > Final Salary screen. 

2. Select the relevant final salary scheme in the ledger, to the right side of the screen.

- If you've haven't entered the final salary into the plan yet, enter the details in the fields center-left. 

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Notes: 

The final salary must be an active scheme, not one that is deferred or currently in payment, as is set in the Status field. 

A deferred final salary (payments either being deferred at present or when they are to be deferred in the future) may be set to have special death in deferment options. Read more >>

Survivor's benefits may be also applied to a final salary that is in payment or once payments begin in the future. These benefits are entered in the Survivor % field in the center of the screen. Read more >>

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3. Click Advanced Settings > Death In Service / Widows Pension.

Note: This facility is not for entering a lump sum death in service benefit. Lump sum death in service coverage is entered separately on the Protection > Term & Endowment screen as an employee benefit. Read more >>

4. Tick "Death In Service / Widows Pension Applies". 

5. Final Salary Accrual Scheme:

- Select Service to Date if payments to the survivor are to be based on the pension accrued at time of death.

- Select Normal Retirement Date if payments are to be based on an assumed accrual up to the scheme's Normal Retirement Age, as set in the center of the screen. 

6. Escalation %: Enter the annual escalation rate if payments from the widow's pension are to increase annually. 

7. Click OK and then Update (or Add) to save your changes. 

 

Option 3 - Entering the details of a case where the client is a widow or widower already receiving a widow's pension

We generally recommend that widow's pension that are already being received by your client at the start of the plan be entered on the Other Income screen as a taxable other income source.

To enter an active widow's pension as an other income

1. Go to the Other Income screen.

2. Select the recipient of the pension in the People panel, to the right side of the screen. 

3. Go to the Time panel, to the right side of the screen, and select the Events tab.

4. Click to the left of the Start event. A green dot will appear, indicating that pension payments are being made from he start of the plan.

5. Next, click to the left of the recipient's Mortality event. A red dot will appear, indicating that payments are to end when the recipient dies. 

Note: Alternative start and end events could be selected in rare cases where the benefits have not yet started or will end earlier than the recipients mortality. For example, if the pension will be paid for ten more years, add an event in the eleventh year of the timeline (e.g. Widow's Pension Ends) and select it as the end event (red dot) for the pension payments. 

6. Income Source: Enter an appropriately descriptive name for the pension - e.g. "Widow's pension". 

7. Income: Enter the amount of current payments from the pension, either as a monthly or annual amount. 

8. Taxation: Set the income as being Taxable.

- In most cases widow's pension benefits are taxable income but like all "other income" sources, benefits are not subject to NI. Income from "employment", by contrast, is subject to NI. 

- Leave Bonuses / Commissions and Benefits in Kind blank. 

9. Expand Advanced Settings > Income Growth and confirm whether these pension payments are to be increased. The software's default assumption for National Average Earnings (from Preferences) will be applied initially to all "other income" sources, so be sure to set this growth rate appropriately for the pension. For example, set growth to 0% if payments are fixed. Click OK

   

10. Also under Advanced Settings, open Survivorship. In practically all cases, untick "Income survives owner". Click OK

- Only tick this setting if your client has remarried (or plans to remarry) and the provisions of the widow's pension would allow it to be passed in turn to the surviving spouse or partner. 

    

11. Update (or Add) to save your changes. 

The income will be displayed in the Let's See > Cash Flow chart under the Other Income category. 

 

If you would rather the income be shown in the Let's See > Cash Flow chart under the Pension category, another option would be to enter the pension as an active final salary

To enter an active widow's pension as a final salary:

1. Go to the Pensions > Final Salary screen.

2. Select the recipient of the pension in the People panel, to the right side of the screen. 

3. Go to the Time panel, to the right side of the screen, and select the Events tab (if it is not selected already). 

4. Click to the left of the Start event. A green dot will appear, indicating that pension payments are being made from he start of the plan.

Note: An alternative start event could be selected in rare cases where the benefits have not yet started. An event could be placed further into the timeline and selected at the starting event for benefits, if needed. 

3. Name: Enter an appropriately descriptive name for the pension - e.g. "Widow's pension". 

4. Status: Set the status of the pension to "In Payment". 

5. Current Amount: Enter the amount of current payments from the pension, either as a monthly or annual amount. 

6. Escalation in Payment: Enter an annual growth rate for these payments if benefits are set to increase annually. Otherwise, leave escalation set to NONE

7. Survivor %: Almost invariably leave the default value of 0%.

- Only set this field with a value other than 0% if your client has remarried (or plans to remarry) and the provisions of the widow's pension would allow it to be passed in turn to the surviving spouse or partner. 

8. Click Update (or Add) to save your changes.

 

 

Further reading

Where to view payments from a widow's pension in the Let's See charts, Incomes vs. Expenditures overview and when running a Life Insurance Need analysis

 

Related Topics

Death in Deferment - Setting the special handling of benefits to survivors in cases where death of the pensioner occurs when a final salary is in deferment. Read more >>

Survivors Benefits from a Pension that is in Payment - Setting the continued payments of a final salary to survivors, if death occurs while the pension is in payment. Read more >>

Death in Service - How to enter death-in-service coverage, a lump sum benefit (paid for by the employer) that pays-out to surviving beneficiaries, if the individual were to die while actively employed. Read more >>