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Pensions Act 2014

Part 2 – Option to Boost Old Retirement Pensions

Section 25: Option to boost old retirement pensionsSchedule 15: Option to boost old retirement pensions

115.A person can pay voluntary Class 3 National Insurance contributions to fill gaps in their contribution record and provide entitlement to basic pension.

116.Section 25 and Schedule 15 of this Act provide for a new class of voluntary National Insurance contribution, Class 3A, for current pensioners and people who reach pensionable age before 6 April 2016. Class 3A contributions will be available alongside Class 3 contributions and will provide entitlement to additional pension.

117.To be eligible to pay Class 3A contributions people will need to meet two simple conditions, namely, that they have reached or are due to reach pensionable age before 6 April 2016 (the start date for the new state pension provided for by Part 1 of this Act) and that they are or will be entitled to some form of pension under the old retirement pension rules (see new section 14A(2) and paragraph 4 of Schedule 15).

118.A person paying Class 3A contributions will obtain units of additional pension entitling them to an amount of additional pension, subject to an overall maximum number of units that is to be set in regulations by the Treasury. Regulations under the provisions inserted into the SSCBA 1992 by Schedule 15 will further define the scope of the measure in terms of the period during which people will be able to pay Class 3A contributions, the price of Class 3A contributions and the circumstances under which refunds will be made.

119.The price of Class 3A contributions will be set in regulations and in setting the price the Treasury will consult with the Government Actuary or the Deputy Government Actuary. A proportion of the revenue collected through Class 3A contributions will go towards funding the National Health Service consistent with the rules that apply to Class 3 contributions (see paragraph 13 of Schedule 15).

120.In line with existing rules on additional pension, the additional pension obtained through the payment of Class 3A contributions can be deferred, inherited by a surviving spouse or shared with a former spouse or civil partner upon divorce or dissolution of the civil partnership and will be subject to annual uprating by prices. There are rules that restrict entitlement in cases where a person is entitled to more than one category of pension under the old retirement pension rules e.g. category A and B. Under the old retirement pension rules a person with simultaneous pension entitlements, for example as a result of bereavement, is prevented from receiving multiple payments. Paragraph 9 of Schedule 15 inserts new sections 61ZA to 61ZC into the SSCBA 1992 that disapply the bar on simultaneous entitlements where this arises solely as a result of entitlement gained from the payment of Class 3A contributions or inheritance of additional pension derived from Class 3A contributions. Similarly, paragraph 8 of the Schedule exempts inherited amounts of additional pension obtained through the payment of Class 3A contributions from the rules that cap additional pension when contribution records are combined following bereavement. In this way the surviving spouse will still inherit that part of the late spouse’s additional pension attributable to payment of Class 3A contributions.

121.National Insurance contributions are an excepted matter for Northern Ireland. Part 2 of Schedule 15 therefore makes corresponding amendments in respect of the payment of Class 3A voluntary National Insurance contributions to the relevant National Insurance legislation for Northern Ireland. However, social security is a transferred matter in respect of Northern Ireland. As such the legislation for the provisions relating to the payment of additional pension entitlement that would arise as a result of payment of Class 3A contributions is not included in this Act as it is the responsibility of the Northern Ireland Assembly.

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