Last month the Government announced that the latest Pensions Bill will after all include changes to the basic state pension which will mean hundreds of thousands more women and men will accrue benefits more quickly from 2010 onwards. The Government is reducing the amount of time for which you need to pay National Insurance to qualify for the full basic state pension from 44 years for men and 39 years for women to 30 years for all. The changes will particularly benefit those who give up working to raise families or care for relatives.
Pensions consultant Ros Altmann points out that women are only to be allowed to make up more missing years of their contribution record if they pay for it. Currently they can only make up the last six years, but last month’s announcement means women retiring between April 2008 and 2015 will be able to buy back a further six years worth of missing contribution years, making 12 extra years in total. Altmann adds that the Treasury is yet to put a price on buying back these extra years.
Adrian Waddingham, senior partner at Barnett Waddingham says: “The Government’s change of heart is great news for the hundreds of thousands of people, particularly women, who take career breaks to raise a family or care for relatives. They are also including other measures to reduce the chance of retirement poverty that has recently been a worrying trend. Topping-up your state pension to the tune of six years worth of missed contributions could prove to be financially astute, particularly if the cost is less than the value of the extra state pension – which could be worth as much as £3,500 for each additional year.”
Altmann says: “People will have to pay to get the extra years of entitlement – it is not free. At the moment, the Government charges around £420 for each year of contributions that is bought, so if someone needs an extra 10 years’ worth of contributions they will have to pay over £4,000.
“Only people who already have 20 years of NI contributions will be able to buy back the extra years, so it does not apply to all women. Now the worse news. None of these changes applies to past pensioners. Anyone who retired before April 2008 cannot buy extra state pension entitlement at all.”