UK: For Better, For Worse? Pensions, Inheritance Rights And Tax

Last Updated: 14 November 2011
Article by Claire Carberry and Charmaine Wilson

Our team focuses on the key legal and financial position of couples who do not enter into marriage or civil partnerships, and discusses whether you have fewer rights if you're living together.

Contrary to popular belief there is no such thing as a 'common law' husband and wife. However long you have been together, an unmarried couple receive hardly any rights compared with married couples or civil partners in the eyes of the law. As around 4 million people in UK today are choosing to live together, sharing homes and in many cases raising children together as a family, it is important to be aware of the areas where the law differs.

Unfortunately, it is often the case that a large number of couples only find out about their lack of legal standing when it is too late – often when their relationship has come to an end. It is therefore important to take measures to protect yourself and your partner in key areas including pensions, co-habitation agreements and rights on death or mental incapacity.

To read the second half of this article – covering topics including issues for Property Owners and Occupiers , Relationship Breakdown and Non- Financial Matters, please click here.


Whether or not you can benefit from a scheme to which your partner belongs will depend on the scheme. Most schemes offer benefits to spouses and to dependent children and some will offer benefits to a dependent partner.

It is important to note that, if your pension scheme offers benefits to opposite sex partners, it should also offer benefits to a partner in a same sex relationship. It is against the law for an occupational pension scheme (and for some private pension schemes) to discriminate against same-sex couples.

If you are not married or in a civil partnership, it is possible to set up a personal pension to provide benefits to your other half, but you may need to make a large contribution to the pension fund. It is also worth bearing in mind that, if you are together, but not married or in a civil partnership, you are not able to claim a state retirement pension based on your partners' national insurance contributions.

If your marriage or civil partnership is brought to an end in court, you are entitled to a share of your ex-spouse or ex-partner's occupational or private pension. If you die, your surviving spouse/civil partner may also be entitled to a share of your occupational or private pension. Such protection is not offered to co-habitees.

Top Tips

  • Check your pension scheme – make sure you read through the details of your pension scheme. Some will not pay survivor's benefits to partners of people who are not married or in a civil partnership. If your pension scheme does recognise your partner then check the period of cohabitation required as there is no prescribed statutory period
  • Plan ahead – Think carefully about how you can build up separate pensions for both of you to maximise your finances in later life

Inheritance rights

If you are married and die without making a Will, your spouse/civil partner will usually inherit all or some of the estate, depending on the value.

If however you are simply co-habiting and you die without a Will your partner will only inherit assets held in joint names as 'joint tenants'. It is therefore vital that you make a Will to ensure that they are provided for.

To view some of the questions our clients ask us concerning making a Will, (and the answers) please click here.

Inheritance tax

One of the key differences of either being married or in a civil partnership is that if you leave your estate to your Spouse or Civil Partner, it is exempt from inheritance tax. When they subsequently die, their estate may benefit from a double tax-free allowance, resulting in up to £650,000 passing free from inheritance tax.

If, on the other hand, you leave your estate to your partner, inheritance tax will be payable at 40% on everything above £325,000 - regardless of how long you have been together. When your partner subsequently dies, your joint estates will be subject to inheritance tax at 40% - and the tax-free allowance will normally be limited to up to £325,000.

Top Tips

  • Make a Will – even if you don't think you have that much to leave. If you do not make a Will, all your assets and property will automatically pass to your blood relations, rather than your partner
  • Review your Will - If you already have a Will, make sure you review it when any big changes occur in your life. The most common changes that affect Wills are marriage or re-marriage, divorce or separation and birth or adoption of children
  • Look into Pre-nuptial and pre-civil partnership agreements – Such agreements may be useful where one or both partners bring considerable assets to the marriage. Although such agreements are not legally binding in England and Wales, the Courts will take them into account when settling financial matters when a marriage or civil partnership comes to an end
  • Take advice – through careful planning you may be able to minimise the amount of inheritance tax payable on death

Mental Incapacity

If you lose capacity to deal with your own financial affairs your family and friends will need to apply to the Court of Protection for someone to be appointed on your behalf. It will be for that person to convince the Court that they are the best person to deal with your finances. This can result in battles – not what is required at such a stressful time. It will also be a costly process – not only as a result of Court proceedings, but also due to the ongoing supervision imposed by the Court.

If you do not have capacity, no-one can refuse or consent to medical treatment on your behalf although it is undoubtedly good practice for a medical practitioner to consult with family and friends. If you do not appoint anyone yourself, the NHS can instruct an independent mental capacity advocate to make decisions regarding serious medical treatment or the provision of accommodation on your behalf.

Top tips

  • Make a Lasting Power of Attorney – even if you are relatively young and in good health, you may unexpectedly lose capacity due to illness or accident. It makes sense to make a Lasting Power of Attorney which allows you appoint a chosen person/persons to make decisions on your behalf and to give them guidance or restrictions. Lasting Powers of Attorney can relate to financial decisions or to Health and Welfare deicisions
  • Consider making a Living Will or Advance Directive - These are less wide ranging than Lasting Powers of Attorney but can be used to set out your wishes in a clear manner

To read the second half of this article – covering topics including issues for Property Owners and Occupiers , Relationship Breakdown and Non- Financial Matters, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions