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Should my wife top up her state pension?

Retirement | Pension Rules Helpful? 3

Asked by markmangham, submitted 27 July 2011.

Open Quote My wife worked for 12 years, was at home looking after our children for the last 12 years, and has most recently been back in employment for 2 years; what can we do about voluntary contributions to her state pension; does she qualify for HRP?End Quote

Answered by Justin on 27 July 2011

Home Responsibilities Protection (HRP) was scrapped on 6 April 2010 in favour of giving national insurance credits to parents who receive child benefit for a child/children under age 12.

However, your wife would have looked after your children while HRP was still in force, so she should have automatically built up an entitlement under that scheme. HRP worked by reducing the number of years of national insurance contributions required to enjoy a full state pension by one year for every year child benefit was received for a child under 16, subject to not reducing the qualifying contributions required below 20 years.

Her HRP benefits will be converted into qualifying years under the new system (up to a maximum of 22 years), likely to be 12 years in her case. This leaves a further 18 years of national insurance contributions needed to reach the required 30 years for a full basic state pension. It sounds like she has 14 of these, so provided she works a further 4 years before retirement she should receive the full basic pension.

However, rather than rely on my guesstimates, much better to get an accurate projection via the State Pension Forecast. It's not unknown for forecasts to sometimes omit HRP (converted into a national insurance contribution credit), if so then contact HMRC (ideally with her child benefit number) and they should correct this.

As for paying extra contributions, this usually makes sense when due to retire with less than 30 years of service. Extra service can be purchased via class 3 national insurance contributions, currently at a rate of £12.60 per week of service, i.e. £655.20 for a year. Given each £655.20 buys 1/30th of the full basic state pension for life, £177.06 a year rising by the higher of earnings, prices (CPI) and 2.5%, it's likely to end up a good deal.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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