As another July drew to a close another Pensions Bill was due to receive Royal Assent. This time the Bill's main intention was to make changes to the way state pensions work, in advance of the wider pensions reform coming our way in 2012, including the popular restoration of the link between the state pension and earnings.
The passage of a Bill through Parliament can sometimes be a delicate thing. It has to pass from Commons to Lords until agreement is received from all. During one of this Bill's Lords stages, a new amendment was inserted which particularly affected women.
The amendment centred on the payment of additional voluntary national insurance contributions. It would allow people with broken career histories to extend the time in which they can make up to nine years' additional national insurance contributions to top up their Basic State Pension (BSP). Under current rules, someone can only pay a voluntary contribution for a particular year if it falls within six years of having 'missed' that year. So if someone took two years off from now to care for a new child and returned to work in 2009, they would have to decide by 2015 whether or not they wanted to make a voluntary contribution to cover that year's NIC 'stamp'. If this amendment went through they could pay additional contributions at any time up until state pension age.
The advantages of the amendment were compelling. It would give someone the flexibility to consider whether they needed to top up their state pension, and crucially, at the time most financially convenient to them. It would also prevent the current position of paying in an additional contribution when it may not be needed in the long run (as it would take them over the line in terms of the level of contributions to qualify for a full State pension). As things currently stand, someone might make the additional contribution, but if it then turns out they didn't need to they can't claim it back.
The amendment would also have a useful role to play in the current discussions on private pensions and means-testing, in removing a trap for the unwary when making voluntary pension provision. Currently, anyone receiving a reduced BSP and subject to means testing in retirement will lose private pension saving on a pound for pound basis up to the level of the full BSP. Anything that makes it easier for people to top up their BSP and avoid the pound for pound trap must be welcome.
As sensible as all this sounds, this amendment was precariously balanced from the word go. The Government said the amendment was technically flawed, and it would also have to consider cost implications. Therefore, it had signalled its intention to overturn the amendment when it came back to the Commons.
As expected the amendment didn't survive, it is I think an opportunity lost. At the moment only about 25% of women retire with a full basic state pension in their own right, mainly because of broken career patterns or the type of work they do. This figure should rise from 2010 when the number of qualifying years of NI contributions needed to receive the BSP reduces to 30 for both men and women. The amendment would have been the chance to do something tangible to help women - and indeed any carer - to help build better pensions in the meantime.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till