Flat-rate state pension: who will miss out?

Two groups of people are at risk of not accruing enough pension credits

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The flat rate state pension promises to be more generous but only for those who receive it, but unfortunately parents and carers are at risk of being left behind.

In April 2016 a flat-rate state pension of £155-per-week will be introduced. Although it's more generous than the current system you'll have to work longer to get it, accruing 35 years of national insurance contributions (NICs), often known as pension credits.

These credits are paid to those in employment who earn over £5,772 a year, and now to the self-employed and also parents who stay at home to look after their children.

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However, there is a slight snag in the system when it comes to parents. Usually parents claiming child benefit would automatically receive a tax credit for the year towards their pension but with changes to the child benefit rules 1.2 million families will no longer qualify for the full amount and thousands will get none.

Those who forego child benefit altogether, will no longer automatically be credited with NICs towards their state pension and must make sure they phone the Department for Work and Pensions (DWP) to explain their situation or risk missing out on the full state pension.

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State Pension Plan: The Winners and Losers

Multiple jobs trap

While parents can flag up their dilemma to the DWP, the same is not true of the 40,000 people (30,000 women and 10,000 men) who are working multiple jobs, each of which pays less than the lower earnings limit of £5,772.

Despite their multiple jobs adding up to a salary of more than the lower earnings limit they will still not qualify for pension credits. This means their state pension could be substantially reduced if they do not accrue 35 years of credits.

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Unfortunately, a number of the people working multiple jobs for low pay are women who have caring responsibilities and use part-time jobs to fit around this, according to pensions expert Ros Altmann.

Many of the women do not receive carer's allowance – which automatically qualifies them for a pension credit – because the people they look after are not sick enough to qualify for the benefit.

We are in a position where thousands of, typically older, women are providing a service to society by caring for their loved ones and are receiving nothing in return, either as carer's allowance or pension credit.

The flat-rate state pension is the best system so far, but we still have some way to go until it is better for all.

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