Government signals review of flawed state pensions
Problems with home responsibilities protection means
thousands of women pensioners may be missing out on £1
billion
The Government has admitted that flaws in the automated HM
Revenue & Customs (HMRC) pension system could mean thousands of
women in the UK are likely to be missing out on a full state
pension, says leading business and financial adviser Grant
Thornton.
The problem concerns the Home Responsibilities Protection (HRP)
system which reduces the number of qualifying years, from 39 to a
minimum of 20 years, required to receive a full state pension for
women who have taken time off work to bring up children.
Although HRP should be given automatically to a woman who has
received child benefit at any time after April 1978 this has not
been the case, with many thousands of UK women unaware they qualify
for HRP and not receiving full pensions because of HMRC's system
failing to automatically adjust their qualifying pension years.
Mike Warburton, senior partner at Grant Thornton, who first
identified this problem before receiving support from Steve Webb
(Liberal Democrats) to pursue the matter further, is pleased that
pension reform minister, Mike O'Brien, has signalled a review of
the system and hopes that the problem can be correctly identified
and resolved with retrospective effect.
"It's admirable that Mike O'Brien has come forward, admitted the
mistakes made by his predecessors and shown intent to fix the
problem," says Warburton. "But, it's disappointing that the
department of work and pensions refused to accept there was a
problem when this issue was raised in May last year."
"With any luck the issue will be identified promptly and the
problem rectified so thousands of women can get what they are owed
as soon as possible," he says.
Warburton says the problem goes back as far as 1978 when HRP was
introduced and his main concern is that thousands of women are
currently struggling on reduced pensions who should actually be
receiving greater state support.
HRP should be given automatically to women, registered foster
carers (since April 2003) and some registered carers for sick and
disabled person who since the 5th of April 1978 have stopped work
to bring up children and who are claiming child benefit. Women who
elected to pay the reduced stamp do not initially qualify for HRP,
but will have qualified once they were off work for two years.
Warburton believes there are two reasons why the system may not
have worked correctly. Firstly, until fairly recently a woman
claiming Child Benefit did not need to include her NI Number on the
form and when their NI record was assessed there was no indication
of child benefit receipt.
Secondly, a large number of women elected to pay the reduced
rate of NI when they started work, probably without realising that
in doing so they were failing to clock up qualifying years towards
their State Pension. Under the rules those women could not qualify
for HRP in those years. Where such woman stopped work for two years
or more post 1978, the eligibility for reduced rate disappeared,
but by the same token, they were eligible again for HRP.
Warburton is concerned that it may be difficult for those who
believe they are affected by this problem to claim back their
qualifying years because two government departments, that of HMRC
and the Pension Service, are involved and will need to coordinate
their activities to process any repayments.
How to find out if you qulaify for a rebate
If you are over 60 or within four months of retirement call the
Pension Service on 0845 6060 265, otherwise call 0845 3000 168. The
request will be put through to your local district and at this
juncture you should request a BR1 form.
The BR1 form is available from
www.thepensionservice.gov.uk. Warburton says, "It is a 16
page document which may be daunting for some people, but it is
relatively easy to read. It asks for the National Insurance Number
and asks about various benefits that the claimant may have
received. However, nowhere on the form is there any reference to
Home Responsibilities Protection, or anything specifically which
might alert someone to the fact that this might be relevant to
their State Pension calculation. For this reason you should fill
out the form and then query it with the Pension Service."
On receiving the form, the Pension Service check with HMRC to
establish whether HRP is available or not. As the current research
has shown this may not be happening in many cases so you are
entitled to raise any queries you have about your pension
entitlement and the Pension Service will investigate on your
behalf.
Warburton believes the whole system relies upon HMRC having the
correct details on the individual concerned and says, "Because of
the merger of Inland Revenue and Customs & Excise and prior to
that the merger of the Inland Revenue with the Contributions
Agency, there is always the possibility that something fell into a
gap between these different agencies at some stage and, of course,
before the National Insurance Number was necessary for claiming
child benefit, it may be that the Contributions Agency and the DHSS
which administered the child benefit did not communicate
effectively. Whatever the case, it will be the responsibility of
the individual to chase this up as neither HMRC or the Pension
Service will be."
*Please note: The below release relates to a
story in the Times that appeared yesterday concerning thousands of
women potentially missing out on full state pensions as a result of
home responsibilities protection not being automatically
calculated. Link to Times story here:
http://www.timesonline.co.uk/tol/news/politics/article3872825.ece