Thousands of divorced women aren’t receiving the full State Pension they’re entitled to – here’s how to check if you’re one of them
The State Pension is the cornerstone of many people’s retirement income. It’s especially important for women when we consider the continued persistence of the gender pay and pension gaps.
Ensuring that you can claim a full State Pension when the time comes is a crucial part of your retirement planning. However, thousands of women who reached their State Pension age before April 2016 and divorced later in life could be missing out on unclaimed State Pension. When you think about how long you might be retired for, it could add up to a significant sum over the longer term.
How does it work?
In April 2016, the ‘new State Pension’ was introduced, principally to provide a simpler and fairer State-backed pension in old age. While in theory the changes meant that no-one would be worse off under the new system in terms of retirement income, they did result in some areas of confusion.
If you reached your State Pension age before April 2016, then the ‘old rules’ apply, which is important if you subsequently became divorced. Under these ‘old rules’, you can substitute your ex-husband’s National Insurance (NI) contribution record for your own up to the date of divorce. This can often provide an uplift to your State Pension income entitlement, especially when we consider that many women may have gaps in their own National Insurance contributions, likely due to taking time out of the workforce to raise a family (the Home Responsibility Protection scheme or certain National Insurance credits may apply) or provide care for others.
Although the need for these rules may seem archaic by today’s standards, it was born out of necessity dating back many decades, recognising the fact that historically, men were the main breadwinners and women’s earnings were often significantly lower. As a result, women were also more dependent on their husband’s State Pension income as they moved into retirement, as their own National Insurance records generated a lower State Pension.
What’s the problem?
So far, this all sounds really useful – so why is it such an issue? To start with, in order to investigate if you meet the pre-2016 criteria and are entitled to an uplift, a manual claim has to be made to the Department for Work and Pensions. This is usually done when you reach your State Pension age but is easily missed.
Research from Lane Clark & Peacock1 found that there are approximately 35,000 divorced older women who are receiving less than 60% of their full State Pension. Further research from the Family Resources survey2 found that there are potentially 100,000 divorced women who are not in receipt of their full State Pension. Could you be one of them?
When making your enquiries, there are some additional things to bear in mind. If you reach your State Pension age after April 2016, and therefore come under the ‘new rules’, there will be a reliance on any pension sharing order put in place to potentially pick this up, so it’s best to speak to your adviser.
Also, if you have subsequently remarried (or entered into a civil partnership) before you reached your State Pension age, then you can’t claim on your ex-husband/partner’s previous NI record. If you have divorced more than once, the claim rules apply only to the most recent circumstances.
What to do next
The Department of Work and Pensions is currently reviewing its cases, but it will be slow going considering the staggering number that need investigating. If you feel that this is something that could benefit you, don’t wait to be contacted by the DWP – get in touch with your St. James’s Place Partner, who will be ready to help you.
1LCP report May 2020 ‘Are thousands of older women being short-changed on their state pension?’
2How women who divorce in later life could be missing out on thousands in state pensions, Lane Clark & Peacock LLP, October 2020
As a Chartered Financial Planner and Fellow of the CII, I have satisfied rigorous criteria relating to professional qualifications and ethical good practice.
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