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Flat-rate state pension: thousands of women to miss out

Only a minority of women will qualify for the full flat-rate state pension when it is introduced next year. Fortunately, there are options.

Flat-rate state pension: thousands of women to miss out

Thousands of women will miss out on the full single-tier state pension when it is introduced next year but if you’re one it’s not too late to boost your pay out.

A Freedom of Information request has revealed just 80,000 women will receive the full flat-rate state pension, forecasted to be £154-a-week, in the first three years of implementation despite 1.2 million people claiming.

The flat-rate will be introduced next April and while 405,000 are expected to claim in 2016 just 20,000 women will get the full rate, compared with 130,000 men.

By 2017 the number of women receiving the full rate increases to 30,000, compared to 130,000 men, and a further 30,000 will receive the full rate in 2019, once again compared to 120,000 men, according to forecasts.

It is only by 2020 that more equal numbers of men and women will receive the full state pension with 130,000 men versus 100,000 women.

Malcolm McLean, pension expert at Barnett Waddingham, said there were a number of factors for the lower rates of women receiving the full state pension, including those who left the workplace to raise children.

However, he believed one of the biggest problems was the increase in the number of years a person had to work to qualify for the full state pension. Under the new rules, a person has to work for 35 years to receive the full rate instead of 30 years.

McLean said it was sure to have ‘the biggest detrimental effect for women’ even though ‘it was no fault of their own’.

‘There is also a new requirement to have a minimum of 10 qualifying years to get even a partial pension and that together with the withdrawal under the new scheme of the right for most women to claim a state pension on their husband’s contribution will also impact women,’ he said.

McLean said it was not too late for women retiring after next April to do something about their state pension now. The first step, he said, was to check how many years of national insurance contributions (NICs) are missing.

This can be done by requesting a pension forecast from the Department for Work and Pensions. You can do this here.  

Topping up

In most cases you can make ‘voluntary contributions’, known as 'class 3' contributions, to fill in gaps in your NI record. Those who will retire with 30 qualifying years can use this option to top up to 35 years and receive the full flat rate.

For example: if you have 30 years' contributions you will get 30/35ths of the forecasted £154 full weekly rate, which equals £132.

In order to top up to the full rate (before 5 April 2019) you would have to pay £13.25 a week, or around £705 to top up the full year.

If you are five years short then it will cost you £3,525 to fill the gap. While this sounds like a lot of money, if could be worth doing as the extra £22 a week, or £1,144 a year, will easily be recouped if you live just three years after your state retirement age.  

‘If there is a gap in the record often it is a good deal [to top it up] if you have a normal life expectancy and you’re not receiving a top up from pension credit [which would be affected],’ said McLean.

‘If you buy a year, then you could easily get that back in three or four years. The problem is finding the [money to top up] in the first place.

He also warned people to check their NI records carefully as paying 40 years of contributions ‘won’t get you any extra pension’.

Delay the pension

Another way to boost your pension is to delay taking it, rather than topping up. McLean said ‘for some people it may be the better option than paying [voluntary contributions]’.

If you hit state pension age after April 2016, then you will receive a 5.8% increase in the pay out for every year you delay taking the pension. This means that a person receiving £132-a-week, or £6,864 a year, would receive an extra £398 a year if they delayed taking their pension.

For those who do not have the money to top up, delaying could be an option.

Unfortunately, the rate for delaying taking the state pension has been cut from 10.4% to 5.8% along with the implementation of the flat-rate state pension. Under the old rules, someone with a pension of £132 a week would receive a delayed rate of £713 extra a year.

In order to determine which option is best for you, McLean said you need ‘to look at the sums’ and your personal circumstances.

Missing out

Although the flat-rate state pension promises to be better value many women may feel they are missing out, if, for example, they have been relying on their husbands' contributions.

‘Some women chose not to pay NI, some were contracted out and some chose to pay a lower stamp and this result is because of that,’ said Fiona Tait, pension expert at Royal London, a pension provider.

‘If you rely on things staying the same then unfortunately it can go wrong,’ she said. ‘There has to be a transition [to the new system] and although it is dreadful [for the women who miss out] the transition had to be made and the longer term it is right for women to have the same retirement age and build up their own NI record.’

10 comments so far. Why not have your say?

Keith Cobby

Sep 10, 2015 at 09:30

The constant meddling has led to these problems. I would cut pensions tax relief and give the flat rate pension to all based only on length of residency.

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Andy Poole

Sep 10, 2015 at 17:59

I have tried to get a pension forecast by clicking on the 'here' symbol but it says the webpage is unavailable!!!!!

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Rovert Ragde

Sep 10, 2015 at 18:42

Well done Keith, that is exactly how Canada calculates their pensions, based on residency, not on contributions. So I agree with you.

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Jeremy Bosk

Sep 10, 2015 at 19:03

Yet the majority of Tory voters are female. Senile dementia? Early onset Alzheimer's? Masochism?

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George Morley

Sep 10, 2015 at 20:50

Rovert Ragde, you mentioned Canada and the UK could well copy Canada and all other countries with a similar pension scheme and stop their freezing policy and pay the pensioner their full pension entitlement wherever they choose to live.

But that is bot the case. A pensioner has a frozen pension when retiring abroad or already living in a 'wrong' country.

This is something that Ros Altmann the Pensions Minister is very much aware of. Hopefully it will not be long before she raises this in parliament.

Following on from the headline, this is then a double whammy for a lady so affected should she emigrate to one if the frozen countries which include most of the Commonwealth countries.

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Justin Forawurd

Sep 11, 2015 at 00:48

Robert Ragde. The Canada Pension Plan (CPP) is based on contributions from employees, employers and self employed. Maybe you are getting confused with the Australin Age Pension which is based on residency and age requirements.

This quote is from the CPP website....

"With very few exceptions, every person over the age of 18 who works in Canada outside of Quebec and earns more than a minimum amount ($3,500 per year) must contribute to the Canada Pension Plan (CPP). If you have an employer, you pay half the required contributions and your employer pays the other half. If you are self-employed, you make the whole contribution."

Both those countries uprate their state pensions annually irregardless of what country you are retired in - this includes the UK. The UK, on the other hand, freezes it's state pension as soon as you take first payment in both those countries (plus a random list of others). No raises for life.

not much reciprocacy there!

A tiny 4% of UK OAPs are cruelly affected by this disgusting policy of impoverishing and OAP until he or she dies. This despite them paying as required into National insurance. The UK government consider this the right thing to do - just as at one time slavery and no votes for women were considered correct!

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Len Murray1

Sep 11, 2015 at 13:13

So just like men then. Only a minority of either sex will get the full flat rate pension when it's introduced.

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Andy W

Sep 11, 2015 at 13:21

CityWire - your link is wrong

You have https//

Should instead be

(colon after https)

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Kim Mcgill

Sep 12, 2015 at 21:43

Under the new pension scheme why should a lot of people loose out if they only work part time and don't earn enough to pay tax and insurance at least these people like myself have jobs

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Barbara Richardson

Nov 24, 2015 at 15:58

Why would I risk delaying my pension in exchange for the promise from the government to increase it in the future? They reneged on their last contractual agreement with me. How stupid would I have to be to trust them a second time?

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