The biggest change in state pensions from more than 60 years begins on April 6. As explained last month, anyone who reaches pension age from that date will need only thirty years’ National Insurance contributions to get a full pension – compared with the current 44 for men and 39 for women. The major changes described in this article affect men born April 6, 1945 or later and women born April 6, 1950 or later. People born before those dates are generally subject to the old rules and not affected by the changes.
Credits
People who look after disabled relatives or friends have found it very hard to
get a full National Insurance record in the past. Before the changes they only
got National Insurance credits if they claimed carer’s allowance and most carers
do not. Others could get what was called Home Responsibilities Protection for
each tax year they cared for someone for at least 35 hours a week. That reduced
the number of years needed for a pension but seldom resulted in carers getting a
full basic state pension.
There are two major changes from April 6. First, carers will get a full National Insurance credit for each week they spend caring. And second to qualify they will need to care for just 20 hours rather than 35. The person they care for will still have to get attendance allowance (or constant attendance allowance under the industrial injuries or war pension scheme) or the higher or middle rate of disability living allowance. But there will be discretion to award the credits if a local health or social care professional says the level of care needed is similar.
At the moment a parent who receives child benefit for a child under 16 gets Home Responsibilities Protection. But from 6 April either parent can be given a National Insurance credit for each week they spend caring for a child under 12. Normally it will be the non-working parent who gets the Child Benefit and the credit. But if the parent who receives the Child Benefit also pays full National Insurance contributions themselves then the credit can be transferred to the other parent. Approved foster parents will be treated equally and will get full National Insurance credit as parents do.
A credit will also be given to people who accompany a spouse or civil partner on an overseas posting with the armed forces.
From April credits alone will be sufficient to get a pension – so someone who has 30 years of credits for caring or parenting will get a full basic state pension. Credits will also count towards the State Second Pension (S2P). Each year of credits will earn about £1.60 of additional pension on top of the basic state pension.
A parent who gets child benefit and people caring and on income support will not normally have to apply for the credits but everyone else will.
Widows
In
future it will generally be better for people over pension age to claim a state
pension rather than continue with widow’s benefits. Contribution conditions for
bereavement benefits are not being changed from April. That means a full widowed
parent’s allowance or bereavement allowance will require the deceased person to
have paid National Insurance contributions for 44 years (men) or 39 years
(women) compared with 30 years to get a full state pension. If in future the
state pension is raised in line with earnings then bereavement benefits will be
less than the pension.
Graduated Pension
Almost everyone who worked between April 1961 and April 1975 gets a small
addition to their pension called graduated retirement benefit. From 6 April 2010
a blatant piece of sex discrimination will end. At the moment men get 11.53p a
week for every £7.50 they paid in graduated contributions but women must have
paid £9 in contributions to get the same 11.53p a week. That rule will end for
people who reach pension age from 6 April 2010 – though not for those who are
older – and men and women will both get 11.53p a week for every £7.50 they paid
in contributions between April 1961 and April 1975. This change will boost the
graduated pension paid to women by about a fifth.
Payment changes
From April new pensioners will lose the choice to have their state pension
paid weekly in advance which has been available since 2003. Encouraged by
Saga, many pensioners have switched
from getting their pension paid four weeks in arrears to getting it paid weekly
in advance. But from 6 April 2010 pensions will automatically be paid four
weekly in arrears. Individuals will be able to choose to have the pension paid
weekly or fortnightly – both in arrears – if they prefer. The new rule will not
affect anyone who reached pension age before 6 April 2010 or who claimed pension
credit before that date. At the moment they can still choose to have their
pension paid weekly in advance – even if they currently do not. But this choice
may not be available forever.
Most state pensions are paid on a Monday, though some older ones are paid on Thursday and widows are paid on Tuesday. But from April pensions will be paid on a day set by the last two digits of the individual’s National Insurance number. People whose number ends in 00 to 19 will be paid on Monday, 20-39 Tuesday, 40-59 Wednesday, 60-79 Thursday and 80 to 99 Friday. Pension entitlement will begin the day after the first pay day. And it will normally be another four weeks before people get their first payment. People who move from another benefit such as bereavement allowance or jobseeker’s allowance will be paid a part week’s pension to tide them over the days between the two.
Earnings link
The Government has promised to raise the state pension in line with earnings
rather than prices. The target date for this change is April 2012 but it could
be as late as April 2015. This earnings link will only apply to the state
pension, not to bereavement benefits. The promise is subject to the result of
the general election and the state of the economy at the time.
Extra NI
contributions
Some people will not have paid the 30 years’ National
Insurance contributions needed to get a full pension. If so they may want to pay
extra contributions to boost the pension they get. Anyone can pay missing
contributions for the last six tax years – back to 2004/05. And those who reach
pension age between 6 April 2008 and 5 April 2015 can pay for six more years
missed from 1975/76. This rule applies to men born in the seven years from 6
April 1943 to 5 April 1950. But rising state pension age limits it to women born
in the four and a half years from 6 April 1948 to 5 October 1952. It only
applies to people who already have at least 20 years’ contributions (including
Home Responsibilities Protection). Married women who paid the reduced married
woman’s contributions, which do not count towards a state pension, cannot pay
full contributions now for the years they paid reduced contributions and for two
full tax years after they stopped working.
State pension age will rise for women who were born on 6 April 1950 or later. Women who reach 60 between 6 April 2010 and 5 May 2010 will not get their pension until 6 May 2010. The age will then slowly rise until women born on 6 April 1955 will reach pension age at 65. Pension age will rise further for men and women born on 6 April 1959 or later.
Further information
State Pensions Guide: Call 0845 7 31 32 33 or go to
www.direct.gov.uk/pensions
State
pension age calculator:
pensions.direct.gov.uk/en/state-pension-age-calculator/home.asp
Retirement planning:
betterfuture.direct.gov.uk/index.html
Paying extra contributions:
www.direct.gov.uk and put
‘top up national insurance’ in the search box.
or call National Insurance helpline 0845 915 5996
State retirement pension forecast:
You can get one instantly online but you must register first at
www.gateway.gov.uk or
call 0845 3000 168