Women's pensions
Cliff edge. That’s the phrase being used by politicians for what will happen on 6 April 2010. Some women who reach 60 on that day will be £25,000 better off than those who reach 60 the day before.
That is the date changes to the qualifying rules for a full state pension come into force. A woman who reaches 60 on 6 April 2010 or later will get a full state pension with just 30 years’ National Insurance contributions instead of the 39 (44 for men) needed now. Someone who reaches 60 the day before with the same thirty years National Insurance contributions will get a state pension of £67.23 – losing more than £20 a week. That reduced pension will cost her on average about £25,000 over the rest of her life.
Of course, the change from 6 April 2010 is a good thing. It helps women (and indeed men) get a full pension even if they have spent up to 15 years of their working lives out of the labour market, perhaps looking after children or spending years in higher education as many did in the 1960s. It is not so much a cliff edge as a fast lane for women who reach 60 after the crucial date – and a lay-by for hundreds of thousands of slightly older women who do not.
The Government has rejected bringing forward the change to help older women as well. Instead, it has promised to look at the possibility of allowing them to buy extra National Insurance contributions to fill any gaps so that they can get a full pension. At the moment these extra contributions cannot be bought for years before 1996/97. If that restriction was removed it would open the way for people with a gap in their records in the 1960s or 70s to pay around £405 for each missing year. Chancellor Alistair Darling will announce the conclusion in his first Pre-Budget report in November.
But allowing people to buy back contributions will not be enough. Filling fifteen years would cost just over £6000. Although that amount would be paid back in extra pensions in about six years, many women could not find the money they needed. One solution would be to let them pay the contributions each week out of their higher pension. That would make sure everyone with a gap in their records could afford to pay the contributions to fill it and would give every one of them a higher pension at once and a full pension in six years’ time.
Let’s hope Alistair Darling has the courage to take this extra step.
Paul Lewis
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