The new state pension: will it affect your divorce?

The state pension is changing. Pre April 2016, an ex-wife could claim credits against her husband’s National Insurance record if she had insufficient qualifying years without affecting his basic rate, but this is no longer the case. Chartered financial planner Elaine Gwinnett looks at how this could impact on divorcing couples.

The new state pension is a regular payment from the Government that you can claim if you reach state pension age on or after 6 April 2016, based on your National Insurance (NI) record.

To receive the full new state pension in future, you will need 35 qualifying years on your NI record. The new system will have just one flat-rate amount added to your future state pension for each extra year on your NI record. There will be no more earnings-related part of the state pension.

The full new state pension amount for 2016/17 will be £155.65 per week, but that doesn’t mean everyone will move to that rate. We cannot just sweep away the past and start from scratch. Everyone reaching State Pension age on or after 6 April 2016 will transition from the complicated old system to the simpler new one. For everybody who has NI qualifying years before 6 April 2016, the Government will work out a starting amount for the new scheme.

Pre April 2016, an ex-wife could claim credits against the husband’s National Insurance record if she had insufficient qualifying years, without affecting his basic rate. This was known as Pension Substitution. No longer! This could seriously affect future income for many women and must be considered when sorting out a financial settlement on divorce.

It is always wise to talk to a financial professional so that you can make an informed decision.

Elaine Gwinnett is a chartered financial planner at Forty One Consulting.
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