The Pensions Act 2007, which received Royal Assent at the end of July, was not the ‘shoo-in' the DWP had wished.
On the face of it, this should have been a breeze. The Act promised better state pensions by reducing the number of years’ contributions needed to achieve a full Basic State Pension to 30 from April 2010, and by restoring the link between earnings and the Basic State Pension.
And although it also increased the state pension age in stages to 68, surprisingly, the UK nation hardly raised a murmur against the idea.
But there were a couple of sticking points that threatened to wreck the DWP’s timetable.
The Lords raised both these points as amendments, during a particularly interesting ‘ping-pong’ of the Bill between the Commons and the Lords. The first was an attempt to create a ‘lifeboat’ fund to top up the Financial Assistance Scheme.
However, as only the Commons can act on issues with tax and spending implications, the Lords’ amendment had to be dropped.
The second was an amendment by Baroness Hollis to allow the payment of additional voluntary national insurance contributions anytime up to retirement, rather than within the current restricted timescale of six years of having ‘missed’ a year, to top up their basic state pension.
There was no doubt such a ‘simple’ change would be good news for many people, especially those with broken career histories, particularly women and carers.
But as with a lot of things in life, it may have appeared simple on the outside, but the DWP argued it was actually complicated and costly to do (a figure of £260m was mentioned).
The Commons didn’t simply dismiss this amendment out of hand, as it initially threatened to do.
Instead, the Government came to a deal with Baroness Hollis, in which it committed to looking at ways it could change the system, and promised an update in the pre-budget report (in October).
The other areas it wanted to consider included looking at the number of years that could be bought and the rate at which the additional contributions could be paid.
The Equal Opportunities Commission (EOC) has recently said that retired women live on pensions that, on average, are 40% less in value than for men.
There’s a lot we need to do as a country to address this, but allowing women to top up their state pensions at a time that financially suits them would at least be a start.
Rachel Vahey is head of pensions development at AEGON Scottish Equitable
The views expressed in this article are those of its author and do not necessarily represent those of IFAonline or any other Incisive Media affiliated organisation.IFAonline
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