State Pension Maze Is Impenetrable For Most People

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State pension rules are so complicated that even the government department responsible for interpreting them seemingly does not understand how they work.

Telephone advisers for the Department of Work and Pension allegedly give conflicting information to callers asking the same questions.

The issue was highlighted by BBC radio’s Moneybox programme, which broadcast wrong answers listeners had been given by the help line.

The problem is working out how much pension is paid and if someone does not receive the full rate, explaining how they can top up their payments.

Former pensions minister Steve Webb has thrown fuel on the fire by penning a 30-page guide to topping up the state pension for his new employer, financial firm Royal London.

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Hellishly complicated rules

Even though experts say his guide is one of the clearest explanations, the details are still hellishly complicated.

The starting point is a 34-box flow chart explaining how someone can increase their state pension payments if they fall short of the expected amount of £155.65 a week.

Most workers approaching retirement believe they will be paid this amount regardless of the number of years they have worked, but this is not the case.

How much state pension is paid depends on how many qualifying years of national insurance contributions someone has and whether their pension was contracted out of the state scheme.

For expats, added complications include whether they have built enough qualifying years by contributing social security payments in another country that has a benefits agreement with the UK.

Reeling in extra years

If someone has less than a 35-year payment record, they will receive a pro rata state pension payment. For example, someone with a 32-year NI record will pick up 32/35 of the state pension full payment.

Under some circumstances, someone receiving less than the full amount can buy extra qualifying years under a special scheme.

“By paying voluntary national insurance contributions, workers can make up some of the shortfall in their state pension created by the years when they were contracted out,” said Webb.

“Hundreds of thousands of teachers, nurses, civil servants and local government workers could benefit from this opportunity to boost their pension at bargain-basement rates.”

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