Government announces pensions boost

9:20am Friday 24th October 2008

Thousands of women who stayed at home to look after their children will be able to receive a full state pension under a top-up payment scheme, the Government announced.

Around half a million people who failed to pay enough National Insurance (NI) contributions will benefit from the policy.

The one-off payment plan will boost the retirement income of a generation of older women who stayed at home to look after children or care for sick relatives.

Up to 555,000 people could benefit from the policy change, which will allow them to make up for missed NI contributions, according to the Department for Work and Pensions.

Only around a third of women reaching pension age qualify for a full basic state pension.

Under the current system, people can buy back the previous six years of missed NI contributions.

Pensions Secretary James Purnell announced an amendment to the new Pensions Bill which will allow women to buy back up to six more years.

The move marks a change of heart for the Government which last year overturned an amendment to the Pensions Bill designed to give people the opportunity to buy back extra years of missed contributions.

Mr Purnell said: "The Pensions Bill will transform pension provision and finally bring equality for women and carers so that by 2010 around 75% of women reaching state pension age will be entitled to a full basic state pension, rising to 90% by 2025, compared to around 35% today. This is fair, affordable and straightforward and it will give more people the chance of a secure future to look forward to in retirement."

The policy will apply to both men and women who reach state pension age between April 5 2008 and April 5 2015 and already have 20 years on their NI record, but in practice women will make up around 90% of those who will benefit, the Department for Work and Pensions (DWP) said.