Non Working Adults – Mind The Gap In State Pension Funding

April 2017
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A recent review of State pension ages has recommended an increase in state pension age for the under 45s. This is designed to reflect ever increasing life spans so that the cost of the state pension can continue to be met.

Some older women born in the 1950s are also campaigning against the steep increases in State pension age they have experienced in the last few years.

Many find the rules around the state pension hard to understand and a large group of individuals may not get a full state pension. Are you one of them? If so, what can you do about it?

The State pension is taxable, non means tested benefit payable to those who have sufficient national insurance credits when they reach State Pension Age (SPA). SPA depends upon when you were born and has over recent years been increased in recognition of ever longer life expectancy. (See table below).

To qualify for the full State pension of £159.55 per week an individual must have 35 years of credits. Those who have at least 11 years credits will receive a scaled down pension. People who are employed and the self employed pay national insurance and so build up credits throughout their working life.

Gaps in employment or self employment may however, leave a shortfall of credits and a reduced State pension. The most common reasons for a career gap are either redundancy followed by a period of unemployment or taking time off to care for children or other family members. Some people may choose not work outside the home. Your state pension may also be reduced due to any periods of contracted out status. This is a complex area, so you may wish to take advice on this.

If you are currently not working in paid employment or running your own business, you may qualify for State pension credits. Circumstances in which these are automatically given include:-

  • Parents in receipt of child benefit for a child under the age of 12 (or 16 if claiming child benefit before 2010).
  • Individuals who are in receipt of Carers Allowance
  • Individuals who are in receipt of Job Seekers Allowance

If you are not receiving these benefits and the State pension credits which they automatically give, there are other ways of claiming additional State pension credits.

Parents who have given up their entitlement to Child Benefit, may claim the home responsibilities credit. To do so you simply need to apply for Child Benefit but elect not to receive it. The form to claim this (CH2) is a long one but worth the effort, as it could be worth thousands in future State pension income.

If you do not qualify for the benefits listed above or have chosen not to work or are not earning enough to pay National Insurance (£5,876 per annum), you can elect to pay voluntarily, Class 3 contributions. This enables you to make payments now, either on a regular basis or a lump sum to build up your credits. So long as you expect to live beyond State retirement age, topping up your State pension is usually good value for money.

To obtain a forecast of your State pension and to find out if you could benefit from Class 3 contributions fill in form BR19 on the Department for Work and Pensions website.

State Pension Age

Men and woman now have the same pension age, except for women born before 6 October 1954. To find out your state pension age see below.

Date of Birth

State Pension Age

   Before 6/10/54


   6/10/54 - 5/4/60

   66th birthday

   6/4/60 - 6/3/61

   Between 66-67

   6/3/61 - 5/4/77

   67th birthday

   6/4/77 - 5/4/78

   Between 67-68

   6/4/78 onwards

   68th birthday

Kay Ingram
Director of Public Policy, LEBC

Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment or product for your circumstances please contact an adviser. The Financial Conduct Authority does not regulate tax planning.

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