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Will you get the full State pension?

Women ‘missing out’ on pensions

Tens of thousands of women are missing out on a state pension because of rules affecting part-time staff, experts say. The Pensions Advisory Service says people who earn less than 95 per job – no matter how many positions they hold – do not get pension credits.
It says such staff are often women who could boost future entitlements by making small changes to their jobs. The government says reforms will make pensions fairer and more generous for women from 2010. Until then part-time workers can make voluntary contributions to build up credits, it adds.

Small changes?

Entitlement to the full state pension is based on the number of National Insurance contribution credits made by workers or those on certain state benefits – currently 44 years for men and 39 years for women. Women who have at least 10 years of contributions will usually be entitled to a reduced pension.

The Pensions Advisory Service, an independent voluntary organisation grant-aided by the Department for Work and Pensions, says only a third of woman currently get a full state pension. It says many women work in low paid part-time jobs and therefore miss out on National Insurance contributions. Contributions are not payable on earnings less than 110 a week but those who earn between 95 and this level are given a credit towards a pension by the government. 

Malcolm McLean, chief executive of the Pensions Advisory Service, says a small pay rise could be worth thousands of pounds in a future larger state pension.

“There could be thousands of women earning less than 95 a week either in single of multiple employments who are unaware that by increasing their hours or work slightly and increasing their pay up to the lower earnings limit neither they nor the employer will be required to pay National Insurance contributions but they will be treated as having paid them.”
From 2010, both men and women will need to have paid contributions for 30 years to claim a full state pension.

The State Pension is administered and paid by thePension Service, part of the Department for Work & Pensions


State Pension Reforms

Qualifying conditions for the Basic State Pension

Currently, to qualify for the full Basic State Pension (BSP), a man needs 44qualifying years and a woman needs 39.

For those reaching State Pension Age (SPA) on or after 6 April 2010, the number of qualifying years needed to qualify for a full BSP will be reduced to 30 for both men and women.  A person with less than 30 qualifying years will be entitled to a proportion of the full BSP for each qualifying year they have built up.

Click here to read more about the BSP.

Claiming a Category B pension

A Category B pension is paid by virtue of a spouse's or civil partner's qualifying years and earnings.  Currently, on reaching their SPA, a person cannot claim a Category B pension until their spouse has claimed their own pension.

This restriction will be removed with effect from 6 April 2010.  As a result, where one member of a married couple or civil partnership has deferred his or her pension and the other member has reached pension age, the other member will be able to claim their Category B pension.

Home Responsibilities Protection entitlement

Home Responsibilities (HRP) will be replaced by a new system of weekly contribution credits from 6 April 2010 for foster carers, people caring for one or more severely disabled persons for 20 hours a week or more or getting Child Benefit for a child under 12 years of age.

For those reaching SPA on or after 6 April 2010, each complete year (up to a maximum of 22) of HRP awarded under the existing rules will be converted into a qualifying year for the BSP. Converting years of HRP can also be used for up to half the working life to help satisfy the condition for bereavement benefits.

Click here to read more about HRP.

Uprating of the State Pension

Subject to affordability and the fiscal position in 2012, but in any event at the latest by the end of the next Parliament, the basic state pension will be uprated annually in line with average earnings rather than prices.

Eligibility for the State Second Pension

The State Second Pension (S2P) provides an additional state pension for:

  • those with earnings at or above the annual National Insurance lower earnings limit (4,940 in 2009/10); and
  • qualifying carers and certain long term sick or disabled people who, for the purposes of calculating the benefit, are deemed to be earning at the low earnings threshold (13,900 in 2009/10).

Employees with earnings between the annual lower earnings limit and the low earnings threshold are treated as having earnings at the threshold for S2P purposes.

From 6 April 2010 access will be extended to foster parents, people awarded child benefit for a child under age 12; people looking after someone with a qualifying disability for at least 20 hours a week. They will be deemed to be earning at the low earnings threshold, for S2P purposes. Additionally, people will be able to combine earnings with credits for caring and/or incapacity within a single tax year in order to build up S2P entitlement.

Restructure of S2P

The rules for the additional State Pension are changing. In the future it will become a simple, single rate, weekly top-up to the basic State Pension.

For people earning 4,940 or more a year or getting credits for State Second Pension, it will start to build up at a flat rate of around 1.60 a week (both figures in 2009/10 money) for each qualifying year. The exact date from which this will start has yet to be fixed, but it is expected to be between 2012 and 2015.

The current earnings-related element built up by people earning between 13,900 and 43,888 a year (in 2009/10) will be gradually withdrawn, so that people will build up entitlement on a completely flat-rate basis by around 2030 or shortly afterwards. These changes to additional State Pension are intended to make it easier for you to understand how your State Pension is worked out and estimate how much you will receive.

Increase to the State Pension Age (SPA)

The State Pension is payable from your State Pension Age (SPA).

Currently, the SPA for men is 65 and for women is 60.

The government has introduced changes to SPAs:

  • Between 2010 and 2020, the SPA for women will increase to 65 to ensure equality. Women born between 6 April 1950 and 5 April 1955 are affected by this change.
  • Between 2024 and 2026, 2034 and 2036 and 2044 and 2046, the SPA for both men and women will rise to 66, 67 and 68, respectively. Those born after 6 April 1959 are affected by these changes.

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