Nearly a million extra low-income households to qualify for State Pension
Those with multiple low-paid jobs who earn below the NI threshold will qualify, with their partners, for credits towards new State Pension.
People with multiple low-paid jobs who earn below the National Insurance (NI) threshold will now qualify – along with their partners – for credits towards the new State Pension, thanks to the government’s Universal Credit and State Pension reforms.
Those with a job earning less than the Lower Earnings Limit (LEL) of £5,668, and who may have other similarly low-paid jobs, are currently excluded from the basic State Pension. They are not liable to pay NI contributions and unless they qualify for NI credits for another reason or make them themselves, miss out on their State Pension.
This is now set to change, with 800,000 households expected to benefit when Universal Credit is fully rolled out. Low-paid women in particular stand to gain credits towards the flat-rate State Pension thanks to the reforms.
Pensions Minister Steve Webb said:
Our reforms will usher in a simpler and fairer State Pension. And with Universal Credit, people with multiple, low-paid jobs will also for the first time be able to access the State Pension.
Hundreds of thousands of people will benefit, particularly women who hold down a number of part-time, low-paid jobs, but have previously been prevented from building up a State Pension.
Under the new single-tier pension, to be introduced in 2016, women will receive a State Pension in their own right, and because of Universal Credit, those on the lowest incomes will no longer miss out. The Work and Pensions Select Committee supports the changes.
The change will also help current claimants of Housing Benefit or Child Tax Credit. Households earning below the LEL with a child over 12 years old will now receive NI credits under Universal Credit. Equally, Income Support claimants, who are either not currently entitled to credits from other benefits or have to apply to HMRC to get credits, will also receive an automatic NI credit towards the State Pension.
More information
From 2016 the current complex State Pension system will be replaced by a simple, flat-rate single-tier pension, for new pensioners. The new pension will be set above the basic level of means-tested support of £145.40 and will be based on an individual’s National Insurance contributions – with 35 years required to get a full pension (though people’s pre-implementation National Insurance records will be recognised). It will be a modern system, fit for the 21st century; simpler to understand and provide a clearer platform for retirement saving.
Universal Credit will replace income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit and Housing Benefit, when it’s gradually rolled out from later this year. 3.1m households will be better off under it – by an average of £168 per month. It will taper people’s benefits, ensuring work always pays.
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