A Bonus for State Pension Income

State pensions (particularly womens) have been given a boost with a proposed change to the rules regarding voluntary National Insurance contributions.

Currently there is a six year time limit on paying these contributions. This means that if you did not pay National Insurance in a tax year you are not entitled to any extra state pension income for that tax year, unless you pay voluntary National Insurance within the next six tax years.

Generally speaking though it is not until State Pension Age that people really look at what they are entitled to, by which time it can be long since the tax years that National Insurance was unpaid with no way of making this up. Bearing in mind what good value the State Pension is for most people, this means a lot of people are missing out on a good way to top up their retirement income.

The new Pensions Bill is going to allow people to defer the decision until their own State Pension Age and allow people to buy up to nine years. This will give everyone a great opportunity to top up this pension when they are at a time when they are more likely to have the funds to pay the voluntary contributions. The big winners will be women, currently only 25% of women have a full State Pension compared to 90% of men.

The government may try to overturn the decision but the recent defeat in the House of Lords will make this more difficult.

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