News/Events

Pension advice for women [16th May 08]

Many ladies approaching retirement are still unsure about changes being made to the state pension in 2010. It is not surprising that the pension help line ran by The Pensions Advisory Service (TPAS) has been inundated with calls since it opened in February last. The majority of these callers have been seeking information about the changing retirement date and, of course, the number of national insurance qualifying years that are needed for the full state pension.

It is an important factor in retirement pension planning and I am relentlessly suggesting to all my clients including the gentlemen that they complete the BR19 - can be done here www.direct.gov.uk to get a proper forecast. The changes proposed are a little less than 2 years away and could have a material effect on the lady’s pension and need to be fully understood and as mentioned taken into account when developing their retirement plan. Very simply, state pension provisions depends on how many years you have made national insurance contributions (NIC). Currently in order to get a full state pension which is £90.70 gentlemen have to make 44 NIC qualifying years and ladies need 39. But from April 6^th 2010, everyone will only need 30 NIC years to qualify. Remember that this maybe some good news for the ladies but bad news is that their pension qualifying age is moving gradually from 60 to 65 to be in line with gentlemen.

Statistically 85% of men currently reaching state pension age are entitled to the full plan whereas this is only 30% for ladies. This is due to many women having time off to look after children or relations or maybe take on part time work whereby they do not earn enough to make NIC’s. The change in 2010 aims to tackle this problem. The anomaly, and don’t the governments just love getting these in place to cause confusion, is that a lady who turns 60 on 5^th April 2010 will need 39 qualifying years but a lady turning 60 a day later will need only 30! Interesting discussion between twin sisters if they were born before and after midnight of the 5^th April 1950.

I have to say that the state pension system is particularly complicated for ladies and it is about time someone in the Department got to grips. In my view the system has been based on an out of date assumption that ladies are reliant on their husbands in retirement. For example if a married woman has not accumulated enough qualifying years then she is entitled to 60% of her husband’s pension. Then there are divorced ladies and a different rule for remarrying before and after state pension age. In addition there is HRP (Home Responsibilities Protection) which allows the number of NIC qualifying years to be reduced. If a lady has spent time at home caring for children since 1978. All ladies should check they have been given the correct credit since 1978. This is being replaced from April 6^th 2010 by a new weekly NIC credit.

Lastly, there are voluntary contributions to enable gaps to be made up which can be useful in certain circumstances but very limited.

For information purposes, the pension advisory service helpline for ladies is on 0845 6012923 or an online calculator to tell ladies when they will retire at www.pensionadvisoryservice.org.uk. No doubt a qualified IFA would also be a helpful in providing holistic retirement planning advice.

This article was written by Langtons - Published in the Western Morning News, Money, 15th May 2008