Millions of pensioners are boosting their retirement income by thousands of pounds annually through inherited state pension payments.
In the 2023/24 tax year, over two million pensioners received payments from the inherited state earnings-related pension scheme (Serps).
Payments, which form part of the old state pension system, have proven to be a valuable source of financial support for surviving spouses and civil partners.
The scale of these Serps payments is substantial, with 541,760 pensioners receiving more than £5,000 a year. Notably, 17,460 pensioners received annual payments exceeding £10,000.
These figures, obtained through a Freedom of Information request by Royal London, highlight how inherited Serps payments represent a crucial addition to their retirement income.
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Britons are looking to boost their state pensions GETTYThe average annual inherited Serps payment in 2023/24 was £3,377. Surviving spouses and civil partners can inherit part of their deceased partner's additional state pension.
This is paid on top of their own state pension once they reach state pension age. Sarah Pennells, consumer finance specialist at Royal London, broke down the impact these payments are having on Britons.
She explained: "This data shows how much of a difference inheriting a Serps pension from your husband, wife or civil partner can make."
However, she warned that despite the millions already benefiting, others may be missing out. "Understanding the rules is key to boosting your retirement income," she added.
The state pension is administered by the DWP
PAThe maximum annual inherited Serps entitlement for surviving partners is £11,356.28 (£218.39 per week) for the 2024/25 tax year.
This represents an increase from £204.68 per week in 2023/24. Some pensioners could potentially receive over £20,000 a year in combined state pension income.
A new state pension system was introduced in 2016, focusing on individual entitlements. However, the legacy of Serps continues to provide additional income for many retirees.
Pennells encouraged pensioners to "contact the Pension Service" if in doubt about their entitlements. This financial inheritance contrasts with how most Britons would handle unexpected windfalls.
Research from Aegon shows 70 per cent of UK adults would prefer to save for the future or pay off existing debt if they received a surprise £5,000.
Only 14 per cent would choose to spend it on themselves or loved ones. This suggests a financially cautious mindset among the British public.
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Britons are looking for the best way to ensure their pension savings go further GETTY The number one preference for a £5,000 windfall would be to deposit it into a bank savings account, chosen by 27 per cent of people.
Putting money into a cash ISA is the second-most popular option at 16 per cent. Paying off existing debt ranked third at 12 per cent.
Investing in stocks and shares ISAs or general investment accounts was preferred by nine per cent. Only five per cent would choose to invest the money into their pension.
A slight generational gap exists in financial attitudes, with 67 per cent of Gen Z (aged 18-27) choosing to save or repay debt compared to 75 per cent of Baby Boomers (aged 60-78).
