Kate Hughes: A lovely loophole for women – but be quick
Saturday 29 November 2008
When every employee of every financial services company in the land is focused on picking apart a single document like the pre-Budget report, loopholes are bound to be unearthed. Usually they represent huge but strangely muted benefits for the Government, at our expense. But Alistair Darling's decision to tinker with National Insurance has inadvertently let an unmissable opportunity out of the bag for women struggling with pension savings. Be warned, though; this is not something to tuck away in the "things to do eventually" file. You'll need to be quick.
About five million women fail to qualify for the full state pension, largely because they took career breaks to bring up children. Few of them will have come home from the hospital realising that their new bundle may just have condemned them to a retirement of poverty.
But some bright spark at Standard Life worked out this week that by doing a little topping up, some people with an incomplete NI record could buy a pension worth £30,656 for just £421, the equivalent of a staggering 7,200 per cent return for your investment.
Women with less than 10 qualifying years of National Insurance are entitled to no basic state pension at all, but as soon as they reach the magic number of 10 qualifying years, they are entitled to a pension of 26 per cent of the full basic state pension. This year, the full BSP is £90.70 a week, meaning that you would need 10 qualifying years to get a pension of £23.58 a week. If a woman has only nine qualifying years, the cost of buying Class 3 National Insurance contributions to get an extra year (and qualify for 26 per cent of the full BSP) is only £421.20, or £8.10 a week. Yet, to buy an index-linked pension of £23.58 a week (or £1,226.26 a year) on the open market would cost £30,656.60 (for a 65-year-old woman).
Sounds great. But there was always going to be a hitch, and based on the rest of the pre-Budget report, it was bound to be an expensive one. Buried deep in the mountain of paperwork, the National Pensioners Convention and others have discovered that the Government has plans to quietly increase the price of buying back a year's worth of National Insurance from £420 to £626 in 2009 – nearly a 50 per cent hike.
"The Government has conned millions of older women by telling them they can buy back their lost pension, but failing to tell them exactly how much it is going to cost," Dot Gibson of the NPC rightly fumes. "Before this increase, only one in 10 were expected to take up the offer, but now it looks like the whole thing is unravelling. Women have a right to feel cheated. Women's pensions are a national disgrace and no amount of tinkering will mask the fact that the basic state pension must be raised across the board for all pensioners to help them avoid poverty in retirement."
You can buy a maximum of six years' worth of NI contributions at any one time, and it could make a real difference later in life. This is the Government whose answer to the desperate problem of 2.1 million pensioners living in poverty is a £60 one-off gift, so the rest of us will need to save ourselves.
Rap music mogul accused of running two men over in his truck
The party's potential nominations read like a high school race for student body president
- 2 The awkward moment Sarah Palin raised $25,000 for Hillary Clinton's election campaign
- 3 Ball pool for adults opens in London
- 4 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
- 5 Baldness could soon be treated using stem cells, scientists hope
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village