James Purnell, pensions secretary

Pension top-up U-turn confirmed

Pension top-up U-turn confirmed

Plans announced today will allow around 550,000 women to top up their missed national insurance payments through a one-off payment.

Work and pensions secretary James Purnell proposed an amendment to the pensions bill which will allow people to buy up to an additional six years of voluntary national insurance contributions, over and above those permitted under the current time limits, in order to enjoy a higher state pension.

“Since 1997 we have reduced absolute pensioner poverty by 1.9 million and our radical reforms of the state pension have made it fairer, more generous and more widely available,” he said.

The new proposals apply to those who reach state pension age between April 6th 2008 and April 5th 2015 and who already have 20 qualifying years on their National Insurance record.

“By 2010 around 75 per cent of women reaching state pension age will be entitled to a full basic state pension, rising to over 90 per cent by 2025, compared to around 35 per cent today,” Mr Purnell continued.

At present many women reach retirement age without qualifying for the full state pension because they have missed national insurance contributions at some stage of their adult life.

“This is fair, affordable and straightforward – and it will give more people the chance of a more secure future to look forward to in retirement,” he said of the new proposals, paying tribute to the work of Baroness Hollis, who had earlier welcomed the moves.

“I have had dozens and dozens of letters from women who are deeply distressed that because they did what most people would think was the right thing to do – look after their families or an elderly relative – they lose out in retirement,” she told the Daily Mail newspaper.

“The next stage is to tell women heading for retirement that this is absolutely worth doing. Even if they were to take out a commercial loan at retirement to make up five or six missing years, they would still be better off.”

The proposals also include a significant increase in the value of class 3 National Insurance contributions due to the government’s pension reforms, with a reduction in the number of qualifying years needed for a full state pension from 44 (for a man) and 39 (for a woman) to 30 for both men and women from April 2010.