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Government change of heart over NI refunds

The Government has pledged to compensate people who pay more national insurance than necessary to qualify for their basic state pension after previously refusing to pay refunds.

Under the current system, people who fail to pay enough NI contributions to qualify for the BSP can pay additional “class 3” contributions to become eligible. The option is mainly taken up by women as only 49 per cent of women qualify for the BSP compared with 91 per cent for men.
The changes, outlined in the Pensions White Paper, will reduce the qualifying period for the BSP from 44 years for men and 39 for women to 30 years for men and women.
It could make extra contributions unnecessary for people who reach state pension age on or after April 6, 2010.
The Government has previously refused to compensate people who continued paying class 3 contributions for the nine months since the changes were announced if they have already accrued 30 years’ contributions or are likely to do so by retirement.
Speaking at the second reading of the Pensions Bill in the House of Commons today, Work and Pensions Secretary John Hutton said: “Some people who have paid NI contributions may not have done so in view of the changes to the eligibility requirements. We will make arrangements for NI contribution refunds for people in this position.”
Standard Life marketing technical manager Andy Tully says: “This is good as far as it goes but there is still an element of unfairness. If the changes to the eligibility requirements go through people will have been paying too much for years. The refunds should go back indefinitely.”

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