Extra extra, read all about it...before you pay up

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Paul Lewis on the web

NI contributions: extra extra, read all about it...before you pay up

The Government has decided to let up some people – mainly married women – pay extra National Insurance contributions to help them get a bigger state pension, writes Paul Lewis

Anyone can already fill gaps in their contribution record back to 1996/97. But now they will be able to pay an extra six years back as far as 1975/76.

And that is important because many people have gaps a long time ago which at the moment they cannot fill.

Adding six years contributions to a deficient National Insurance record will boost the state pension by about £13 a week now and up to £18 a week for people who reach pension age from April 2010.

That's the good news. Here is the bad. The new rules will be hedged round with exceptions, restrictions and exclusions.

* They will only apply to people who reach pension age from April 6, 2008 to April 5, 2015. That means men born between April 6, 1943 and April 5, 1950 and women born between April 6, 1948 and October 5, 1952 (because pension age for women is increasing they are the last group who sneak in before the cut off date).

* To qualify you have to have at least 20 years contributions already (including years of Home Responsibilities Protection when you were getting child benefit or caring for a dependant adult.)

* Married women will not be able to make up for years when they paid the lower married woman's National Insurance contribution.

The Pensions Minister Rosie Winterton admits that of the 500,000 who might fit the bill only 110,000 will actually pay the contributions and get the extra pension. And the party has been spoiled by the Treasury which insisted the change wouldn't cost anything. As the extra pension is worth £600 million between now and 2050, a lot of money has to be raised to balance the books.

It will come from charging more for the extra contributions. The price will increase from the current £8.10 a week to at least £13 and probably more. Raising the bill for six years' contributions from £2500 to more than £4000.

For some women this is still a good deal, even if they borrow the money to do it. But for others who can get a similar pension on their husband's contributions or who have a low income and can get pension credit it definitely won't be. And no one knows who will be able to advise them on what they should do.

* Written by Paul Lewis. Paul is the editor of Saga Magazine's Money News section and the presenter of BBC Radio 4's Moneybox. Paul's opinions are his own and for general information only. Always seek independent financial advice.