Widowhood: Economic Issues

Income in the later years of life, including during the period when only one spouse survives, is a result of life-long earnings and savings. In most developed countries, widowed women report lower incomes and are more likely to be poor than are other groups of elderly persons. In part, this is because they are drawn from poorer couples. But the larger explanation lies in the way in which public and private income and assets are, or continue to be, paid to surviving spouses. National social security systems can and do smooth out the consequences of earnings differences. While most developed countries provide survivor benefits (although Sweden has eliminated them), variations in rules about the share of inherited benefits, offsets for other income, minimum age of benefit receipt, minimum guarantees in public programs, and the role of the private sector in retirement income are all thought to contribute to differences in the well-being of widows. Clearly, the generosity and security of the underlying benefits paid to married retired workers provides the first layer of economic protection to surviving spouses. Survivor benefits build on this relative generosity.

The survivor benefits payable in Germany would seem less generous than in the United States, but they build on a more generous retirement base. During the first three months of widowhood, women receive 100 percent of the insured’s pension. Thereafter, 60 percent of the pension is paid if the widow is age forty-five or older, if she is disabled, or if she is caring for at least one child. Otherwise, only 25 percent of the insured’s pension amount is paid. These benefits are generally not taxed but they may be offset by other income. When the additional income exceeds a limit (equal to about one-third of the maximum benefit), benefits are reduced by 40 percent of the excess amount.

In contrast, the British national insurance system allows for inheritance of benefits with few offsets. Widows age forty-five and over without children get an age-graded share of the Basic Benefit, and at fifty-five they receive the full grant. While widows are eligible only for the higher of their own or their husbands’ Basic Pension benefit, they may inherit their husbands’ State Earnings Related Pension Scheme without offsets for other income or earnings. For widows of men who would have reached pensionable age before October 2002 (age sixty-five) the percentage inherited is 100 percent of the benefit, although it is scheduled to decline gradually to a maximum of 50 percent by October 2010.

In Canada, surviving spouses are eligible for a benefit consisting of two parts: a flat-rate benefit and an earnings-related benefit that is equal to a percentage of the benefit for which the deceased spouse would be entitled were he or she age sixty-five. After age sixty-five, this percentage is 60 percent, regardless of the age at which benefits were first received. Survivors may receive both the survivor benefit and their own benefits, subject to limits which may reduce their total below the combined benefits. Information on the Canadian plan can be found at www.hrdcdrhc.gc.ca/isp