The State Pension and missing NICs
Maybe this has happened to you too.† The post that hits the Bee household every day contains a fair bit of junk mail, but hidden in amongst it, along with the bills and free newspapers, we get our fair share of heavyweight letters from Her Majestyís Revenue and Customs and the Department for Work and Pensions telling my wife and three daughters that they may not have paid full National Insurance Contributions in the past and that their state pensions may suffer as a result.
The way the post gets shared out in our house goes a bit like this; anything thatís obviously junk gets put straight into our recycling bin; if itís a free paper it goes in there too; if a letter is addressed to anyone of us in particular it gets put in the appropriate place in the hallway that weíre all supposed to keep checking out and itís our own fault if we donít; if itís from a charity it gets put in a drawer full of guilt which we only ever open if weíre in the mood for it; if itís a bill it gets put in our bill drawer and my wife sorts them all out every week or so; if itís a Marvel comic Iíve bought on ebay it usually gets left on the step where the postman leaves it because the packages donít fit through our letterbox (this can happen irrespective of the value of the comic in question or the state of the weather); and, if itís something thatís not in any of these categories itís put in the Ďtoo difficultí pile in the kitchen and weíre all responsible for making judgements on what to do with it.† The only exception to all of this is that if any post at all comes from HMRC or the DWP it is put in a pile that I have to sort out, irrespective of which one of us it is addressed to.† Thatís because Iím supposed to be an expert on that sort of stuff so Iíd may as well make myself useful etc.
So I get to read all of these letters that go on about the fact that my wifeís working history was not complete and she has big gaps in her National Insurance payments that could be put right if thatís what she wants by simply paying additional voluntary Class 3 NI Contributions if she likes.† No pressure, just thought theyíd mention it, that sort of thing.† Each letter comes with a fairly incomprehensible pile of official paperwork and stuff that looks like you need to be a brain surgeon to be able to read it (not that brain surgeons would get the time I guess, what with the pressures in the NHS and all these days).† But you know what I mean.
I can understand why my wife gets these letters as she had some breaks from teaching years ago, but itís always baffled me why my daughters get them (and I have read the stuff through, by the way, but it just doesnít jump off the page why theyíve been selected to receive such unsettling news that by their late teens and early twenties their state pensions may already be crocked).† My only guess is that as theyíve taken gap years and done part-time work and work placements and stuff theyíve briefly slipped out of the education field long enough for their names to come up as NI payers on the governmentís systems - and once youíre on that list I suppose theyíre on your case for life even if you go back into full-time education.† But I donít know, and donít really want to know I suppose; Iím just guessing thatís why they keep getting these unsolicited letters.
I would imagine that the government departments these days feel that itís better to give out as much information on state pensions as they can so theyíll not find themselves being caught out again in the way they were a few years ago when they tried to cut back widowsí Serps benefits but hadnít really told anyone in advance.† You probably remember all the fuss at the time that resulted in the Serps cutbacks being staggered over ten years *.† If they keep telling people these days that theyíve got a dodgy NI Contribution history that could lead to a lower state pension entitlement and keep telling people that filling in form BR19 will get them an up-to-date (but oh so hard to interpret) statement of their prospective state pension entitlement, then no-one will be able to say they werenít warned.† I donít know if thatís the case, but it would explain the number of letters that keep getting added to my pile of post at home on the subject.
From time to time over the last couple of years or so my wife has asked me if thereís anything that she should do, or our daughters should do, to fix their pensions.† She canít believe theyíd go to so much trouble to write so much and so often to her if thereís nothing to worry about.† But Iíve kept a fairly consistent line that the changes that were in the air ought to be left to go through first before any decisions are made by anyone with a Bee surname to throw voluntary contributions into the state pot.† Thatís because I know that the state pension system has been under close scrutiny by the government people lately, but I also realise that from my wifeís point of view it might also be because Iím ducking the issue because itís a hell of a fiddly job I donít fancy getting embroiled in (like when I had to sort out the broadband and wireless internet fiasco).
Well, as you know as well as I do, those changes are now going through in this current White Paper and the whole basis of the way people (especially women) will qualify for their state pensions is about to be changed fundamentally **.† In a nutshell women reaching state pension age after April 6th 2010 [we get four out of four ticks in that box in our household] will now be able to get a full pension for fewer years of NI Contributions.† So I probably did well to get them to ignore the official brown-envelope hard-to-read stuff that theyíve been bombarded with these last few years.† But thatís because I really do know a little bit about this pension stuff.† But Iím unusual; I know that.† In real life I donít meet many people who a) know, or b) care about this sort of stuff.† Thatís because most of the people I hang around with are normal.† (Incidentally, thatís partly why Iím so pleased to have met all of you through the magic of the web.† I mean, you donít just understand this stuff, but youíre even interested enough in it to keep reading about it too!† Thatís been a great source of solace to me I can tell you, even if it means youíre not normal either.)
My purpose for bothering you with all this today though?† Well, I canít believe itís just my family thatís been singled out to receive these letters about how to pay extra National Insurance Contributions; maybe someone in your family, or some of your pension clients have been getting similar letters too.† If they have it might be worthwhile letting them know that the state pension system is about to be reformed once again and keeping them†up-to-date with the changes.† It seems to me thereís no point in paying additional National Insurance Contributions to buy extra qualifying years if the number of qualifying years for a full state pension is just about to be reduced dramatically.† Iíll bet people wonít get extra pension benefits if they inadvertently pay too much in National Insurance.† Thatís just not the way these things workÖ
27 September 2006
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* The Pension Service leaflet - Important information for married people - Inheritance of SERPS, April 2006.
** DWP - Security in retirement: towards a new pensions system, May 2006.