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29 November 2000
The preservation of United Kingdom state retirement pensions is difficult for individuals living and working abroad.
My client is a former nurse, now the wife of a full-time Christian worker, and the family are resident in West Africa. My client has some past 'qualifying' years for National Insurance contributions purposes, but wishes to preserve her own pension entitlement.
My client is a former nurse, now the wife of a full-time Christian worker, and the family are resident in West Africa. My client has some past 'qualifying' years for National Insurance contributions purposes, but wishes to preserve her own pension entitlement.
The preservation of United Kingdom state retirement pensions is difficult for individuals living and working abroad.
My client is a former nurse, now the wife of a full-time Christian worker, and the family are resident in West Africa. My client has some past 'qualifying' years for National Insurance contributions purposes, but wishes to preserve her own pension entitlement.
A Contributions Agency leaflet states that if the individual is at home looking after children then 'home responsibilities protection' will apply, granting her credit for years at home, and this is extended to people resident abroad.
However, on closer examination, the Department of Social Security at Longbenton states that home responsibilities protection does not apply, because my client is (obviously) not receiving child benefit. Clearly this is a 'catch-22' situation.
Have other readers encountered this ruling, and can they suggest any solutions?
(Query T15,719) — Stymied.
Answers:
The rationale behind home responsibility protection is relatively sound in that it protects individuals who, because of family circumstances, are unable to work and so pay National Insurance contributions to build up a right to a retirement pension. Women bringing up a family are by far the biggest group of individuals so disadvantaged, hence the link to receipt of United Kingdom child benefit. To extend the home responsibility protection provisions further would have a significant cost in both the benefit subsequently paid and the control mechanisms which would need to be in place.
The safeguarding of retirement pension rights by other means is not a difficult matter to achieve. Provided United Kingdom contributions have been paid at a sufficient level in three earlier years, or three years of United Kingdom residence have been attained, it is possible to pay voluntary Class 3 contributions which cost £6.55 a week. In certain circumstances it may be possible to pay voluntary Class 2 contributions, which have the advantage of costing only £2 a week yet provide wider benefit entitlements. The writer does not give enough information to be able to address this issue.
It is the general shortage of information which makes this query somewhat difficult to deal with. How old is the woman, how many qualifying years does she already have, and is her husband continuing to pay United Kingdom National Insurance contributions on a voluntary basis, are a few of the questions that need to be answered. The woman will be able to obtain her pension based on her own contribution record at age 60 or perhaps later if she is young enough, whilst her husband will have to wait until age 65. The important point to make is that once she reaches retirement age and her husband reaches age 65 she will be entitled to receive in her own right 60 per cent of his basic pension entitlement. What she cannot receive, however, is both — as she will be restricted to the higher of the pension based on her own contributions or 60 per cent of her husband's pension.
Is it therefore worthwhile paying voluntary contributions? The answer will be 'yes' if she could build up a pension right which is significantly more than her husband's 60 per cent, or if they are roughly the same age or she is older. If she can be entitled to a pension for a few years before her husband reaches retirement age, then she will show a significant return on the contributions she has paid.
A bit of further investigation is needed, and the starting point for both husband and wife is the completion of form BR19 requesting a retirement pension forecast from the Benefits Agency. — Muffin.
I have not seen the leaflet to which the querist refers, but if it states that home responsibilities protection is available to non-residents it is clearly misleading, as the protection is only available if child benefit is received and child benefit is only payable for temporary absences from the United Kingdom.
It is a common misconception that home responsibilities protection credits a National Insurance record for any year to which it applies. The way it actually works is to reduce the number of years during which contributions are required to be paid to qualify for retirement pension. Normally this would be 39 years to qualify for full pension, with a reduced pension being paid for any lower number of years of contributions. There must be a minimum of one quarter of the 39 years, as adjusted for any home responsibilities protection, in which contributions have been paid to qualify for any pension.
Voluntary Class 3 contributions may be paid to improve the contributions record.
If the wife paid reduced rate contributions, these would not count towards the pension. Consideration must also be given to the husband's position, since when he reaches pension age his contributions may have an effect on her entitlement. Presumably the querist has already obtained a pension forecast from the Department of Social Security at Longbenton to know that home responsibilities protection is not available, but if not, this will give the current position and will show how much can be paid in voluntary contributions for the past six years. It is also advisable to obtain a pension forecast for the husband to check his pension entitlement, as it is likely that his record will also be affected by overseas residence.
It may be the case that it would be better for the husband to pay voluntary contributions to maintain his record and create a non-contributory pension for the wife, but this will very much depend on the individual circumstances of this case. — PS.
My client is a former nurse, now the wife of a full-time Christian worker, and the family are resident in West Africa. My client has some past 'qualifying' years for National Insurance contributions purposes, but wishes to preserve her own pension entitlement.
A Contributions Agency leaflet states that if the individual is at home looking after children then 'home responsibilities protection' will apply, granting her credit for years at home, and this is extended to people resident abroad.
However, on closer examination, the Department of Social Security at Longbenton states that home responsibilities protection does not apply, because my client is (obviously) not receiving child benefit. Clearly this is a 'catch-22' situation.
Have other readers encountered this ruling, and can they suggest any solutions?
(Query T15,719) — Stymied.
Answers:
The rationale behind home responsibility protection is relatively sound in that it protects individuals who, because of family circumstances, are unable to work and so pay National Insurance contributions to build up a right to a retirement pension. Women bringing up a family are by far the biggest group of individuals so disadvantaged, hence the link to receipt of United Kingdom child benefit. To extend the home responsibility protection provisions further would have a significant cost in both the benefit subsequently paid and the control mechanisms which would need to be in place.
The safeguarding of retirement pension rights by other means is not a difficult matter to achieve. Provided United Kingdom contributions have been paid at a sufficient level in three earlier years, or three years of United Kingdom residence have been attained, it is possible to pay voluntary Class 3 contributions which cost £6.55 a week. In certain circumstances it may be possible to pay voluntary Class 2 contributions, which have the advantage of costing only £2 a week yet provide wider benefit entitlements. The writer does not give enough information to be able to address this issue.
It is the general shortage of information which makes this query somewhat difficult to deal with. How old is the woman, how many qualifying years does she already have, and is her husband continuing to pay United Kingdom National Insurance contributions on a voluntary basis, are a few of the questions that need to be answered. The woman will be able to obtain her pension based on her own contribution record at age 60 or perhaps later if she is young enough, whilst her husband will have to wait until age 65. The important point to make is that once she reaches retirement age and her husband reaches age 65 she will be entitled to receive in her own right 60 per cent of his basic pension entitlement. What she cannot receive, however, is both — as she will be restricted to the higher of the pension based on her own contributions or 60 per cent of her husband's pension.
Is it therefore worthwhile paying voluntary contributions? The answer will be 'yes' if she could build up a pension right which is significantly more than her husband's 60 per cent, or if they are roughly the same age or she is older. If she can be entitled to a pension for a few years before her husband reaches retirement age, then she will show a significant return on the contributions she has paid.
A bit of further investigation is needed, and the starting point for both husband and wife is the completion of form BR19 requesting a retirement pension forecast from the Benefits Agency. — Muffin.
I have not seen the leaflet to which the querist refers, but if it states that home responsibilities protection is available to non-residents it is clearly misleading, as the protection is only available if child benefit is received and child benefit is only payable for temporary absences from the United Kingdom.
It is a common misconception that home responsibilities protection credits a National Insurance record for any year to which it applies. The way it actually works is to reduce the number of years during which contributions are required to be paid to qualify for retirement pension. Normally this would be 39 years to qualify for full pension, with a reduced pension being paid for any lower number of years of contributions. There must be a minimum of one quarter of the 39 years, as adjusted for any home responsibilities protection, in which contributions have been paid to qualify for any pension.
Voluntary Class 3 contributions may be paid to improve the contributions record.
If the wife paid reduced rate contributions, these would not count towards the pension. Consideration must also be given to the husband's position, since when he reaches pension age his contributions may have an effect on her entitlement. Presumably the querist has already obtained a pension forecast from the Department of Social Security at Longbenton to know that home responsibilities protection is not available, but if not, this will give the current position and will show how much can be paid in voluntary contributions for the past six years. It is also advisable to obtain a pension forecast for the husband to check his pension entitlement, as it is likely that his record will also be affected by overseas residence.
It may be the case that it would be better for the husband to pay voluntary contributions to maintain his record and create a non-contributory pension for the wife, but this will very much depend on the individual circumstances of this case. — PS.
