"What is particularly concerning is the extent to which some cohabitees falsely believe they are entitled to the same benefits as those who are married."
For schemes where unmarried partners are permitted to be beneficiaries, they need to be named as such on the nomination form: however, a third (33%) of cohabitees have not yet named the beneficiaries of their pension if they die and 6% don’t know whether they have.
The number of cohabitees has soared to 3.3 million, more than doubling since 1996 and accounting for 17% of all families compared to 9% twenty years ago.
Nearly one in five (19% or 627,000) think they are entitled to bereavement benefit or allowances if their partner dies, despite the fact upcoming legislation will reaffirm that this does not apply to cohabitees.
However a recent Supreme Court case, which ruled in favour of a woman seeking access to her late partner's pension, could eventually improve the pension rights of unmarried couples across the UK.
Though the Cohabitation Rights Bill is currently progressing in Parliament, which will give cohabitees certain protections, Aviva does not expect the bill to be finalised any time soon.
When it comes to tax rights and obligations, 18% think they are eligible for the same Capital Gains tax breaks as married couples, and 15% wrongly believe they can pass on their assets to a surviving spouse without incurring any Inheritance tax.
Homeownership levels are also significantly lower among cohabitees: 58% own their home outright or with a mortgage, compared to 74% of married people – cohabitees are therefore less likely to have experienced a key trigger for taking out financial protection.
74% do not have a will, while 64% of cohabitees do not have life insurance.
Only 4% have a precautionary arrangement, such as a cohabitation agreement, in place to protect their finances should a relationship break down.
Paul Brencher, Managing Director, Individual Protection, Aviva UK commented: “Many couples in the UK are choosing to marry later or not at all. But cohabitees do not enjoy the same financial benefits as those who are married or in a civil partnership.
“What is particularly concerning is the extent to which some cohabitees falsely believe they are entitled to the same benefits as those who are married. Such confusion has the potential to cause significant financial stress should their family experience an unexpected change in circumstance.
“Though it is welcome that more rights are on the horizon through the Cohabitation Rights Bill, cohabiting couples should take the time now to better understand their financial situation in order to plan effectively for the future. We must strive to create a mind-set among all UK family types that proactively planning for the long-term is important not just for those who are married but for all those who want to enjoy a comfortable future without the fear of financial uncertainty.”
