With the State Pension paying out paltry sums to UK pensioners, it’s clear we all need as much help as we can get. Fortunately, a recent Royal London study highlighted a little-known mechanism in the benefits system that could boost the finances of thousands of elderly Britons.
Under current rules, women retiring on or after April 6 2016 receive state benefits based on their own record of National Insurance (NI) payments and not their husband’s. Before this date women could claim a partial State Pension based on spousal contributions, meaning those women who were expecting their benefits to be based on their husband’s NI payments stood to suffer under recent rule changes.
But here’s the good news: as per a little-known concession under the new system, a woman who paid a reduced rate of NI — known as the ‘Married Woman’s Stamp’ — at any point in the 35 years before reaching pension age could claim based on their husband’s NI record.
10,000 entitled to bigger benefits?
So how does this stand to benefit someone? Well the rate payable would equate to a full basic state pension of £129.20 per week for women who are divorced or widowed, or 60% of the basic benefit (worth £77.45 per week) for those who are married.
And according to Royal London, the government thinks there could be as many as 10,000 women who could stand to gain from this concession.
The Married Woman’s Stamp ended for new married women at the end of the 1970s, though those who were already paying the reduced rate were allowed to continue doing so. This entitlement continues to this day but lapses if a woman pays no contributions for two full years.
Royal London suggests around 200 women are still paying NI contributions at a reduced rate, while HM Revenue and Customs estimates that there could still be some women paying the married woman’s stamp until the late 2020s.
It’s no surprise that Royal London is imploring women receiving less than the amounts described above (£129.20 or £77.45 per week) to get in touch with the Pension Service to see if they’ve paid the stamp in the past, as they could be entitled to a higher pension. Sensible advice, of course. But it’s unlikely that it’ll be the difference between just surviving and living a life of luxury.
It’s clear that relying just on the State Pension to fund your retirement is extremely risky business. Report after report shows that an environment of flimsy state benefits has plunged hundreds of thousands of elderly citizens into severe poverty, and the problem threatens to get worse as government grapples with the ballooning costs of funding Britain’s ageing population.
What’s clear is that we all need to take charge of our financial destiny to lessen our reliance on these rock-bottom benefits. But the good news is that through stock market investing, a tried-and-tested way that helps people build big retirement pots (with returns of around 10% per annum for long-term investors), it’s possible to protect yourself in retirement, whatever your age. Even if you’re 50 years old and with no savings in the bank, you can expect to make a pot worth around £200,000 by the time you hit the State Pension age by investing just £500 each month. And there’s a galaxy of great stocks out there to help you do just that.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019