State Pension written on paper with pen

Should I consider insuring my state pension?


The state pension has made many headlines over recent years, with most stating doom and gloom for those who are looking to retire in the future, and with the ever increasing age at which the state pension can be claimed, you could be forgiven into thinking that the state pension is not worth relying on in retirement.

However, whilst the majority of the headlines seem to have been negative, the value of the state pension should not be overlooked as this forms a critical part of a retirement income for nearly all retired households and it would certainly be missed if it was not there.

The state pension provides one of the few sources of “risk free” income and, when producing retirement cashflow forecasts, most people we speak to become very aware of their reliance on the state pension, with fewer and fewer people being able to rely on final salary pension schemes.

If you are entitled to the full state pension you will receive a sum of £175.20 a week, or just over £9,100 a year. For a retired couple, two state pensions would provide the household with over £18,200 of risk free income each year. For many, this will allow them to cover a significant proportion of their expenditure, with any additional income requirements usually being generated from personal pensions, investments or maybe from a rental property.

However, the Pensions and Lifetime Savings Association, in their Retirement Living Standards research, found that for a couple to retire on a “Moderate” standard of living (Outside of London), a household income of £29,100 a year would be needed, and for a single person, or for someone who may have been widowed, this sum is £20,200 a year.

Whilst the state pension meets a proportion of the income requirements for a married couple, there is one very real danger to retirement income - the death of a spouse or partner. Under current legislation, if you are in receipt of the state pension these payments have to cease on death, thereby leading to a fall in household income for the survivor. It should also be considered that other sources of retirement income may also reduce or cease, it is extremely important therefore that plans are in place to cover the loss of income.

Similarly, it is just as important to ensure that plans are in place to protect the future state pension receipts, even if you have not yet retired. Every person who has worked through their career will have had National Insurance payments deducted from their salary/profits for the duration of their working life. Sadly, if they pass away before retirement age, then no state pension will be payable. From October 2020, the state pension age is due to rise to 66, and at this age, the average life expectancy for a man and woman are 85 and 87 respectively (Office for National Statistics). 

The state pension, in normal circumstances, could be paid for over 19 years, providing over £173,000 of income per person (even without allowing for any inflationary increases), so for the partner of someone who passes away before the state retirement age, this is a large amount of income for the survivor to try and replace, or partially replace depending on the life style they are still aiming to achieve, from other sources or investments.

Thankfully, there are ways in which you can ensure that in the event of your death, your husband, wife, or partner does not suffer this significant loss of income in retirement by securing a similar level of income through the use of life assurance for a relatively low cost. Life assurance is often discounted by many as not being a necessity and is rarely considered in retirement, but it is extremely valuable should your retirement planning not go “to plan”. Sadly most only miss not having cover until it is too late and have to make significant changes to their retirement plans as a result.

Whilst the state pension will continue to generate headlines, for most people it will still form the backbone of their retirement plans. The loss of a state pension income will have profound effects on the retirement plans for the survivor, but by arranging a full financial plan, and having the right financial protection in place, you can be assured that you will continue to have enough income to retire on, whatever happens.

At Armstrong Watson, our quest is to help our clients achieve prosperity, a secure future and peace of mind, we work with you to help build your retirement plans with regular reviews so you can remain on track. We can do this remotely via video as well as face to face with the necessary social distancing precautions in place. 

For information or advice, please call Chris Hill on 07718479723 or email

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