Older divorced women losing out on State Pension

Thousands of women who have divorced later in life may be unaware that they are not receiving the full amount due from their state pension.

The last two decades have seen a considerable rise in the number of couples divorcing after they have reached retirement age (so-called "silver separators"). Often, one party (typically the woman) may be receiving less than the amount they are due from their state pension.

The issue

The problem potentially arises for women who were receiving the state pension before 6 April 2016 and who were divorced before that date. The amount of state pension for that group would have been calculated under old rules.

Until 2008, women who had already started to claim a state pension and were divorced before 2016, should have had their ex-husband's pension contributions taken into account. For this group of women, the Department of Work and Pensions may not have been made aware of the divorce. In many of those cases, women are receiving less than their full entitlement to state pension.

How did this come about?

The amount received in state pension depends on the record of National Insurance contributions. A total of at least 10 years of contributions was needed to obtain any state pension. To qualify for the full state pension an individual must have a full contributions record. If the record of contributions is not a full 30 years, then the pension will be proportionately less than the maximum amount.

What remedy is available?

A person who is not able to establish a total of 30 years' contributions, is entitled to substitute their spouse's credits for their own (known as the Married Woman's Pension). The rules apply equally to men as they apply to women, based on their ex-wife's entitlement if they have few pension credits themselves. The sum is worth 60% of the basic state pension.

Case study

Janet started claiming her state pension in 2010, but did not have a full record of contributions, but her husband Brian did. She would be entitled to a married women’s pension.

Assume Janet and husband Brian divorced in 2017. If Brian has a full contribution record and Janet does not, she can claim that Brian’s contributions should be substituted for her own. In that way she will almost certainly be entitled to a full pension.

Why has the increase not been added automatically?

The increase in the rate of pension due does not happen unless the Department for Work and Pensions is notified of the divorce and the party receiving the lower pension wishes to rely on the higher pension contributions of the former spouse.

Is the problem continuing?

No. Under the new rules, from April 2016 the Department treats every contributor as a separate individual. This only affects those receiving their pension under the "old" scheme.

Advice

Those who think they may be affected by the shortfall, to contact the Department of Work and Pensions, giving the NI number and a brief summary of their age, when they started to receive the state pension and when they were divorced. It could be worth it. Over a typical retirement the additional amount payable could be as much as £50,000.

If you would like to discuss the issue of pensions on divorce, please get in touch with Sarah Green.

This article is for general information only and does not, and is not intended to, amount to legal advice and should not be relied upon as such. If you have any questions relating to your particular circumstances, you should seek independent legal advice.