Women set for pensions boost

12 April 2012

Thousands of women who took time off to look after children will be able to boost their state pensions under a top-up scheme announced by the Government.

Work and Pensions Secretary James Purnell is proposing an amendment to the Pension Bill enabling people to buy up to an extra six years of National Insurance contributions.

Each extra year of National Insurance contributions adds around £160 a year to the state pension that people are entitled to. But the Government is increasing the cost of buying extra years from its current level of £420 per year to ensure the move will not cost it anything, although it has not yet said what the increase will be.

The new top-up scheme is available only to people who already have at least 20 years of National Insurance contributions, meaning that many women could still miss out.

It also applies only to people who reach the state pension age between April 6 2008 and April 5 2015, so will not enable the majority of women who have already retired to boost their pension.

The Government estimates that around 550,000 people will be eligible to buy up the extra years, but in reality it expects only around 20% of these to take advantage of the scheme.

The announcement applies to both women and men, although women are thought to make up 90% of those who will benefit as they are far more likely to have a broken contribution record as a result of taking time off to look after children or elderly relatives.

People can already buy six additional extra NI contribution years, but there are time limits on when these years can be purchased. Under the new scheme people will be able to buy any six years going back to 1975, meaning they will now be able to buy up to 12 extra years.

The measure is the latest part of the Government's reform programme which aims to make the state pension fairer for women. The announcement also marks a change of heart for the Government which last year overturned an amendment to the Pensions Bill designed to give people the opportunity to buy back extra years of missed contributions.

Mr Purnell said: "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."

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