View more on these topics

Basic injustices

Many women are finding they have paid unnecessary voluntary NI contributions

The latest Pension Bill has laid the ground for the fundamental changes to the way the basic state pension will work in future. We all knew what the Government had in mind but now it is official.

That is the way it works with pension legislation these days. We have seemingly endless periods when we are engaged in consultation. Everyone knows what is coming but the reality only hits once we see it on the legislative conveyor belt.

The changes to the state pension system are now on that conveyor belt,so it is just a matter of waiting for the Parliamentary process to run its course.

One of the issues that has been in the air for ages now, but is finally on the conveyor belt of reality, is the change to the number of years of National Insurance contributions people will be expected to make in order to qualify for the full basic state pension. The payment is £84.25 a week for single people these days but you only get the full rate if you have clocked up enough years of full NI contributions. Right now, the number of full years required by men and some women is anything up to 44 whereas for most women it is 39.

In fact, only 30 per cent of women manage to qualify for the full rate of basic pension. That is because the way an average working life pans out for most women does not really give them a fair shot at meeting the high number of target years needed to get the full pension. It has always been an unfair system.

The new Pensions Bill is going to do something about this at last. The intention is to reduce the number of contribution years to 30 for all men and women by 2010. That should mean that the number of women qualifying for the full basic state pension will go up from a miserable 30 per cent to a healthier 70 per cent. That is good, of course, but not as good as if the bill had fixed this inequality for 100 per cent of women immediately.

Until now, anyone who was not on target for getting the full basic state pension has had the opportunity to make up for lost years by making voluntary NI contributions. If you are a man, that has not been likely to bother you much, but many women have needed to understand what voluntary contributions are all about if they have wanted a chance at getting the full pension. The Government has done a good job recently of bringing this problem to the attention of women.

My wife and three daughters have all regularly been in receipt of letters from the Government extolling the virtues of having a full NI contribution record and putting the case for making voluntary contributions. It seems to me that many women will have been concerned to find out about their pension prospects this way and many will have made voluntary contributions to make up their shortfalls. The women in my family did not do that, even though they were worried about their pensions, because I knew what was in the air and told them not to worry.

But many women who have been happily paying voluntary contributions to boost their basic state pension are just finding out that they need not have bothered. They will get a full pension anyway under the new rules from 2010. It does not look like the Government will be refunding overpayments.

There are always going to be problems when our pension system is in a continuous state of flux. If that is the reality of our pension world, then it seems to me that the Government should look carefully at allowing people to undo past mistakes made in good faith when things were different. Anything else seems so unfair.

Steve Bee is head of pensions strategy at Scottish Life

Recommended

Mastek launches UK agency management solution

Mastek has announced the formal launch of its new Elixir Agency Management solution to the UK market.Mastek is pleased to announce that UK providers can now take advantage of the benefits of its agency management solution.Elixir Agency Management is part of its market-leading ‘Elixir’ sales andpolicy administration system, which uses component-based architecture todeliver a flexible, […]

Defaqto appoints new chairman

Defaqto Group, the owner of research company Defaqto and finance portal Find.co.uk, has appointed Rupert Pennant-Rea as chairman.

Zero impact

Guy Anker reports on the plan to exempt eco-homes from stamp duty

Relative values

Rising house prices have made many parents anxious about helping their 20-somethings in the property market

The Merchants Trust PLC – April 2017

Welcome to the latest update for The Merchants Trust PLC from the Trust’s portfolio manager, Simon Gergel. Portfolio Review The Merchants Trust reported results this month and the directors were pleased to announce a 35th consecutive year of dividend growth (subject to shareholder approval at the AGM). The Company is proud to be highlighted as […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com