A working wife with no state pension

Giulia Khawaja
Age: 56
Lives: in Andover
Occupation: Part-time lecturer
Earns: ?9,800
Mortgage: None
Debts: None
Investments: ?3,000 cash plus Isa
Pensions: No state pension, little private
Aim: To remain financially independent

Giuilia Khawaja believes she will get no basic state pension because she paid the reduced married women's National Insurance rate for most of her working life.

She is in the same position as 4.5 million women, a third of whom are still working. Between 1948 and 1977, married women who worked could save money by paying a lower NI rate. They kept some benefits, but lost their entitlement to a basic state pension. All they would receive was one based on their husbands' contributions.

Giulia paid the full stamp for the first three years she worked: 'However, this apparently does not count.' She then moved to Pakistan to get married.

She and her husband came back to England after 10 months and started a family. She did not return to work until her second child started school in 1979, a gap of 10 years, and has worked part-time ever since.

Giulia started as a technician in a local college's art department: 'We were all told by the college that, as married women, it wasn't worthwhile paying the full National Insurance stamp because - and these were the words that I remember - you get a pension on what your husband pays.'

She has continued paying the lower stamp for 23 years. 'My quotation for a basic state pension is nil. I asked the Department for Work and Pensions whether my three years' full-time work counted and they said no.'

Giulia has little work pension either because, being part-time, she was not allowed to joint the Hampshire County Council scheme until 1995: 'People in my position seem to have lost out on every front.'

For the past 12 years, she has been teaching photography, graphic design and drawing, initially doubling as technician and teacher.

In 1997, she switched to teaching only and left the council scheme with just three years' membership. The scheme says she cannot access this until she is 65. She joined the Teachers' Pension scheme: 'Being part-time, I have always had a small salary, and two years ago I thought about paying Serps, but the pension scheme said it was not worthwhile. They said at my age there was nothing I could do.'

A few weeks ago, the college offered her voluntary redundancy, but she is not sure whether to take it: 'I would like to continue working, but only part-time because I am studying as well, doing a distance learning archaeology certificate.'

Her husband is 64 and has taken early retirement but Giulia wants to be independent when she retires: 'I don't want to be supported. I have always worked and had my own money to spend. I don't want that to stop when I stop work.'

She has heard about the new state second pension and asks: 'Is there anything I can do to, rather belatedly I admit, rectify the problem?'

Adviser 1: James Dalby

Giuilia should be entitled to the dependents'
pension, currently ?45.20 a week, based on her
husband's NI contribution record.

She should confirm this with the Department for
Work and Pensions and ask why she was allowed
to pay the reduced contributions given her
employment start date.

By paying reduced rate, Giulia is not building up
any entitlement to additional state pension, now
known as the State Second Pension (S2P), which
gives most help to the lowest earners. If her
quotation is the standard pension forecast, it will
show the number of qualifying years she may be
able to build up if she were to cancel her reduced
rate contributions and start paying standard rate.

When she receives her Teachers' Pension
forecast, she should ask them again for their
opinion on paying standard rate NI contributions.
Because Serps has been replaced by the S2P, it is
important to see if the pension scheme has
changed its advice. She should ask the Teachers'
scheme about paying Additional Voluntary
Contributions.

Giulia should decide how much tax-free
redundancy pay she would be happy receiving.
She is unlikely to have any rights to a more
generous package but, by giving her employer a
clear figure, he will have something firm to work
to.

Once her employment ceases, so does her
contribution to the Teachers' Pension scheme. If
Giulia's husband dies before her, she will inherit
90 per cent of his Serps pension.

James Dalby is head of research at Bates
Investment Services.

Adviser 2: Donna Bradshaw

There is no point paying full-rate National
Insurance Contributions, because you need at
least 10 years' contributions for the minimum
pension, which is less than the pension you will
receive based on your husband's record.

But it isn't correct that you get nothing. When you
reach 60, you can claim the additional married
pension in your own right, worth 60 per cent of
the basic state pension. And an anomaly in the
new State Second Pension means you will be
entitled to that too, albeit only a small amount
based on the number of complete tax years from
6 April 2002 to age 60.

You can investigate making up for the years
outside the Hampshire County Council scheme,
which is the Local Government Pension Scheme
(LGPS).

Part-timers can get cred ited for years they were
excluded, although you have to pay missed
contributions. You may have a similar situation
with your Teachers' scheme.

You could ask for increases to your pension as
part of your redundancy package. The LGPS and
Teachers' are 'club' schemes, so you can transfer
your LGPS pension into the Teachers' scheme
and be credited with the same number of years. If
your salary now is greater than the final salary
you had in the LGPS after indexation, transferring
is beneficial. If your salary now is lower, you
should leave your pension where it is.

You can boost your pension with savings, even a
stakeholder pension.

Donna Bradshaw is a director of Fiona Price &
Partners.

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