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Many women unclear about new pension rules

20 January 2009

As it's dedicated pensions helpline for women approaches its first anniversary (on 4 February 2009), the Pensions Advisory Service (TPAS) is claiming that many woman are unaware of and/or confused about forthcoming changes to the state pension.

TPAS says there are three main areas of difficulty:

1. Changes to women's pension ages

Between 2010 and 2020, state pension age for women will increase progressively from 60 to 65 to bring it in line with men's. The staged increases will apply to women born between 6 April 1950 and 5 April 1955. Many of the callers to the helpline appear not have appreciated their state pension will not be paid to them, as now, at age 60 and that in some cases they will have to wait several years before payment can commence. This means for some a major re-think of their retirement plans.

2. Reduction in the number of qualifying years needed to qualify for a full basic state pension

Whereas a number of the women who contacted the helpline had heard of the reduced national insurance (NI) qualifying years requirement (down from 39 to 30 years from 6 April 2010), many of them seem to be unaware that this is a "cliff edge" change. In other words, when a woman reaches her 60th birthday on (or before) 5 April 2010 she will still normally need 39 years to get the full pension, whilst a woman whose 60th birthday is a day later on 6 April 2010 will only need 30 years. Some callers thought there was a way round this by staying in employment and not retiring until after 6 April 2010 but we had to tell them that wouldn't work. It was their date of birth that was the determining factor not their actual date of retirement which in this context was totally irrelevant.

3. Improved ability to pay voluntary N.I. contributions

Many women have confessed to being very confused about their right to make good missing NI contributions and whether it would be to their advantage to do so. Although especially beneficial to women, the rules are indeed complex. .Ordinarily, you can pay voluntary NI contributions for any one of the previous six tax years.

At present, however, a special concession exists whereby missing contributions for the tax years 1996/97 to 2001/02 can also be made good and paid at the rate which would have applied in the year in question. This will cease after 5 April 2009 for some women (those who reached state pension age on or after 24 October 2004) and after 5 April 2010 for others (those who reached pension age between 6 April 1998 and 24 October 2004). From April 2009, a further concession is being brought in making it possible to make voluntary contributions for an additional six years for any tax years from 1975. This will apply though only to women who reach pension age between 6 April 2008 and 5 April 2015 and already have at least 20 qualifying years on their record. The contributions will also all be charged at a new higher rate of £12.05 a week, up from the current rate of £8.10.

"It is very important", says TPAS Chief Executive, Malcolm McLean, "that women, particularly those approaching retirement age, are aware of all these important changes. They could have a material affect on their pension plans and, in the case of voluntary NI contributions, the possibility of their securing a bigger pension for themselves for life. I would urge all women who are not clear as their rights in this often complex and confusing area to contact our helpline and we will do our utmost to put them in the picture and provide what help and guidance we can".

Note for Editors

1. The dedicated Women's helpline was opened experimentally on 4 February 2008 but continued permanently due to heavy demand.

2. The contact number is 0845 600 0806. Opening hours are Monday to Friday 9.00 a.m. to 5.00 p.m.

3. TPAS is an independent body supported by the Government. It provides free information and guidance to the public on pension matters generally.

4. TPAS provides a range of leaflets on different aspects of pensions. Details can be found on our website which also includes a web based Annuity Planner.

5. TPAS also acts as an impartial mediator on pension disputes involving occupational, personal and stakeholder pensions.

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