Welcome to my third blog where this time I want to focus on state pensions.

I recently went to a Women in Business networking (WIBN) meeting in Dunmow, Essex. This is a regular meeting that I attend on a monthly basis and this month fell on International Women’s Day so a fabulous way to spend it.

This month it was my turn to ‘Spotlight” where as a member I have a 10 minute slot to talk about my business.

I had been thinking for a couple of days what I would base my spotlight on, I am passionate about Pensions, so wanted this to be my subject matter but I also wanted the content to be relevant to the women in the room and current in terms of what is happening with regards to pensions now.

State pension benefits have changed and those who will be effected must are Women and those who have been or are members of Contacted out Company pension schemes and those not paying National Insurance contributions!

This could possibly one of the biggest changes in many years and seems to have fallen below the radar for most of us. Do we really understand the impact and how it effects us in the future as well as retrospectively! So here is a shortish guide on the main changes.

State Pension Changes

Major Changes to the State pension come into effect from 6 April 2016. These changes could mean that some people get nothing?! It is supposed to be simpler and fairer but people could be in for a shock.

Currently people are entitled to some state pension even if they have only paid national insurance contributions for a few years.

The full state pension is £115.95 a week and you need 30 years of contributions to get this.  This is then toped up from SERPS/ S2P (second state pension).

Workers are currently able to pay into S2P over their whole working lifetime and can build up to an additional £160 a week in second pension, which could significantly increase the basic pension to as much as £275 a week from the £115 .95 p.w.

On the old system someone with five years of contributions (perhaps because they worked part-time or for low pay) would get about £19.30 a week.  Under the new rules they will not get anything!

What is changing?

There are two parts of the UK state pension: the flat-rate basic state pension, and the additional state pension, which is partly earnings-related. Under the current scheme you can build up contributions to the basic and second additional pension.

However, from April you will contribute to a single flat rate pension. The new scheme is only for people who reach state pension age on or after 6 April. So that is men born on or after 6 April 1951 and women born on or after 6 April 1953.

Going forward to get the full state pension you will need to have made at least 35 years of contributions. Now if you have fewer than 10 years NI contributions you will get nothing, yes that right ….. NOTHING!

How much is the new pension worth?

The full flat-rate pension will be introduced at around £155 a week for those who have reached pension age. However, many will receive far less because some will not have paid enough in national insurance contributions.

Many like me will have contracted out of the state earnings related schemes for some of their working life. You may not have chosen to do this as your employer may have done this for you on joining their staff pension scheme. These diverted contributions mean you will receive a smaller state pension.

How many people will lose out?

The government has admitted that 63% of those reaching state pension age in 2016-17 will receive less than the full rate when the new scheme starts in April.

Any other drawbacks?

Under the new system contributions will be capped at 35 years with no additional pension. The abolition of the second state pension means savers will continue paying the same rates of national insurance after they have qualified for the new pension in full, but will no longer get any extra benefit.

What can you do to improve your pension?

You can fill in up to six years worth of gaps in your NI contribution record. If, say, you had nine years’ of NI contributions you can boost this to 10 or more to get some entitlement under the new state pension. This is definitely worth doing rather than not getting any money and it makes sense to benefit from those years of contributions already made but you will need at least four years of NI contributions to make it worth while.

You can do this even after state pension age. However, there are exceptions to the rule. Men born before April 1950 and women born before April 1952 have up to six years after state pension age to buy additional years. People reaching state pension age after 6 April 2016 have until 2023 to make up any missing years. However, you cannot buy back entitlement lost through time contracted out.

You should check with the Pension Service that paying for the gap will actually increase your state pension. People with 30 years or more of contributions may find that filling in missing years before 6 April 2016 does not actually increase their pension!

Use can use this link to the online calculator at gov.uk/state-pension-topup to find out how much you would need to pay for extra state pension income.

Or you can get your State Pension forecast at gov.uk/future-pension-centre or by calling 0345 300 0168.

Women’s woes

Up to 50,000 women are set to loose out (according to figures from the charity Age UK) Because they have fewer than 10 years’ of contributions they won’t receive a penny in state pension when they retire!

From 6th April 2016 women will be responsible for building up their own national insurance record. They must have 35 years’ worth of contributions to qualify for the full amount, and a minimum of 10 years to receive anything at all!

Changes from April also mean that women who gave up work to raise a family are unable to claim a state pension based on their husbands’ national insurance records. In the past these women would have been able to receive a payout. For those retiring under the new system this is no longer guaranteed.

There is a reprieve for some women affected by this change, who are entitled to receive up to 60% of their husbands’ record. This is provided they have paid at least one year of lower-rate national insurance contributions – known as the “married woman’s stamp” – in the 35 years leading up to retirement.

Millions of older women have seen their retirement hopes dashed by changes to the state pension system. They have been caught out both by an increase in the age at which they can claim, plus a change in the way payouts are calculated.

The rise in the state pension age for women from 60 to 65 was further revised in the 2011 Pensions Act increasing their retirement age to 65 by 2018 and by November 2020 there will be a further rise to 66 and another rise to 67 by 2028!

If you would like to discuss the impact that these changes will have on your retirement then feel free to contact me to. Whilst I am based in Braintree, I am always out and about seeing clients throughout Essex and Hertfordshire and I would be delighted to meet up and chat with you further.

All the best