State pensions – A warning for stay at home mums and ex wives!

The Government have recently announced the new State Pension changes introducing the new single tier pension for those reaching state pension age on or after 6.4.2017. This scheme is based upon National Insurance contributions over a 35 year working life period.

Under current legislation where a husband has accumulated the relevant number of years NI contributions (30 years), a wife upon divorce has been able to substitute her own contributions record to that of her husband’s to claim an enhanced pension upon reaching retirement age.

This is will now change from 6.4.17 when the individual will not be able to substitute contribution records and the pension entitlement will be based upon that individuals contribution history. Whilst there are still campaign groups seeking to reinstate the old rules permitting the substitution of the contribution records of those who have recently divorced but will not retire for a number of years, as it stands there is no provision for substitution beyond April 2017.

This could mean that those carefully calculated settlements in divorce proceedings which provided for equality of income at retirement may now be unequal by as much as £144 a week where a wife has no contribution record of her own, perhaps a forces spouse who has lived overseas etc.

Where a wife (usually the case) has stayed at home and cared for the children she will be able to claim a contribution record for the time when she was in receipt of child benefit but to receive the full £144 a week she will need to have a contribution record of 35 years! If not they faced a reduced state pension.

A pension forecast can be obtained by individuals worried about their position by going to the Government website

With the link for National Insurance contribution records and the child benefit payments, a further warning is given that those higher income couples where one partner earns more than £60,000 per annum will not be eligible for child benefit and many will opt out as opposed to completing a self assessment form. Accountants are advising to maintain the claim for child benefit and elect not to receive it  or have the benefit recouped through the tax charge imposed upon the wage earner as this will preserve the NI contribution record for the future.

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