Newly bereaved individuals across the UK are facing what campaigners are calling a bereavement penalty from both insurance companies and government tax authorities, with shocking cases emerging of automated systems causing severe financial distress during the most difficult times.
The HMRC tax nightmare for new widows
Dr Susan Treagus from Manchester experienced firsthand how HM Revenue and Customs' automated systems can devastate finances after her husband passed away in March this year. After notifying authorities through the Tell Us Once service, she received what appeared to be routine tax code notifications.
Her small occupational pension was suddenly almost halved when HMRC's computer system incorrectly calculated her income. The automated assessment had added an extra £62,000 to her pension income, pushing her into the higher tax threshold based on a flawed calculation method.
"HMRC had recalculated my income as a new widow by adding up electronic transfers in and out of my bank accounts during February and March, then multiplying by twelve to reach an annual income of over £100,000," Dr Treagus explained. "I was told this calculation had not involved humans - it was completely computer-generated."
Insurance companies' bereavement premium practices
Separately, another individual who wished to remain anonymous described facing a car insurance bereavement premium after his wife died five years ago. His insurer increased his premiums despite his unchanged driving circumstances, implementing what the company called a "bereavement premium" policy.
The widower found an unusual solution that highlights the absurdity of insurance algorithms. "I solved the problem by adding my son to my policy - my son who lives about 100 miles away, who I see about three times a year, and who rarely travels with me," he revealed. "Result? I'm happy and their computer algorithm is happy. Does it make sense? Not in the slightest."
The human cost of automated systems
Dr Treagus expressed deep concern about the lack of human oversight in systems affecting vulnerable people. "If I had not been educated, numerate and able to manage my affairs as a newly widowed person, I would probably have been taxed as if I have a £100,000-plus annual income all year," she stated.
The timing of these financial blows compounds the trauma of loss. Dr Treagus emphasised that the HMRC error occurred within five weeks of her husband's death, nearly halving her monthly income during a period of intense grief and adjustment.
Both cases raise serious questions about how financial institutions and government bodies treat bereaved individuals, with automated systems making life-altering decisions without proper human review or consideration of personal circumstances.
