DWP Press Release 24 October 2008 - Pensions boost for women - Purnell

The government will today propose an amendment to the Pensions Bill to allow people to buy up to an additional six years of voluntary National Insurance contributions, over and above those permitted under the current time limits, in order to enjoy a higher state pension.

The measures are the latest part of a programme of reform that will see the state pension system offer a fairer deal to women and carers. They will benefit thousands of women who traditionally have incomplete National Insurance records and therefore often receive a low state pension.  The proposals will apply to those who reach State Pension age between 6 April 2008 and 5 April 2015 and who already have 20 qualifying years on their National Insurance record, taking account of Home Responsibilities Protection.

The value of class 3 National Insurance contributions is increasing significantly because of the Government's pension reforms, in particular the reduction in the number of qualifying years needed for a full state pension from 44 (for a man) and 39 (for a woman) to 30 for both men and women from April 2010. The Government will increase the price of a Class 3 contribution accordingly. This will ensure the package will overall be cost neutral.

Announcing the proposal, Secretary of State James Purnell said:

"Since 1997 we have reduced absolute pensioner poverty by 1.9 million and our radical reforms of the State Pension have made it fairer, more generous and more widely available. By 2010 around 75% of women reaching State Pension Age will be entitled to a full Basic State Pension, rising to over 90% by 2025, compared to around 35% today.

"However, we are mindful of the potential disadvantages faced by those who do not have a full work history, mostly women and those with caring responsibilities. I would like to pay tribute to the tireless efforts of Baroness Hollis who has championed their cause so effectively.

"This is fair, affordable and straightforward - and it will give more people the chance of a more secure future to look forward to in retirement."

The Government is already committed to making radical changes to the pension system through the Pensions Act 2007 and current Pensions Bill:

• The number of qualifying years needed for a full basic State Pension will reduce to 30 for both men and women (from 39 for women and 44 for men currently).
• New weekly National Insurance credits will be introduced which will recognise caring for children or disabled people in the same way as paid work. These credits will replace Home Responsibilities Protection and will count towards both the Basic State Pension and State Second Pension.
• Measures in the current Pensions Bill will provide equality of opportunity for male and female employees to build up a private pension. We expect up to three million extra women to participate in workplace pension saving as a result of our reforms, many of them gaining access for the first time.
• In addition around half a million women who are already saving will benefit from a higher employer's contribution.

Notes

1. Voluntary Class 3 NICs were introduced to enable people with deficient contributions records to maximise their basic State Pension entitlement.  They also count for Bereavement Benefits.
2. Under current rules an individual who is able to pay voluntary Class 3 NICs can pay for them up to 6 years after the end of the year for which payment is made.  People may have to pay a higher rate if they delay payment.
3. Currently, the time limits have been extended for the tax years 1996/97 to 2001/02 when the issue of Deficiency Notices was suspended. People who reach state pension age on or after 24 October 2004 have until 5 April 2009 to pay and people who reached state pension age before 24 October 2004 have until 5 April 2010. No higher rate charge applies for the tax years 1996/97 to 2001/02 if contributions are paid within these time limits.
4. In 2008-2009, the full basic State Pension is £90.70 a week for an individual, but your individual circumstances may affect the amount you get.
5. In 1997 the poorest pensioners lived on £69 a week - today pension credit means no pensioner need live on less than £124 a week - £189 for couples. From October, DWP has made it simpler and more automatic to claim Pension Credit, Housing Benefit and Council Tax Benefit in one call. Older people can claim the three benefits together, entirely over the phone without having to sign or return any claim forms by calling 0800 99 1234.

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