The proposal to scrap the £66-a-week basic state pension top-up for spouses or civil partners as part of a reform of the UK state pension system is expected to feature in tomorrow's Queen's Speech.
A consequence of the reforms that will see a £144-a-week flat-rate pension introduced is the end to spouses who receive zero or only a partial basic state pension being able to boost their income based on their partner's National Insurance record.
This top-up can be worth up to £3,500-a-year.
This past weekend pensions minister Steve Webb drew attention to the issue by focusing on the 220,000 spouses currently claiming the top-up who live overseas - some of whom have 'never set foot in the UK'.
But many more partners who do live in the UK also receive the benefit, and though those already receiving the top-up will continue to do so, those who would normally be eligible will no longer be able to claim from April 2016.
Who is currently eligible for the top-up?
In the current financial year, those who are married or are in a civil partnership can get the top-up of anything up to £66-a-week if they're not eligible for a basic state pension or are not getting the full amount, if:
Both have reached state pension age.Their spouse or civil partner qualifies for some basic state pension, even if they haven't claimed it.For married men and civil partners, their partner was born after April 6, 1950.When added to their partner's basic state pension of £110.15, the current maximum basic state pension for a married couple therefore stands at £176.15 in 2013/14.
How will it change?April 2016 will see the introduction of the new flat-rate basic state pension, which will be worth £144-a-week in today's money, which will replace the current basic state pension and the second state pension.
The new single-tier pension will be calculated based on an individual's record of National Insurance (NI) contributions, so people will no longer be able to boost their state pension income based on their spouse's work record.
More... Can I pay extra into the second state pension so I get more than £144-a-week flat rate in 2016? How to make the most of a smaller pension pot: Don't stand by as your nest egg is eaten up by low rates and inflation New state pension age: when will you retire? Could equity release be right for you? Check our free guide Retiring soon? Get an annuity quoteThis top-up benefit currently costs the Government billions in total, with £410million paid out to the spouses of overseas UK residents alone. The end of this top-up will therefore help make the reforms to the state pension 'cost neutral'.
Under the new system, UK residents will have to have 35 years of NI contributions to get the full state pension. If they have less than 10 years, they will get nothing at all. Years in which parents are out of work to look after young children, or care for sick relatives, count towards their state pension.
Technically, this means a couple between them could increase their basic state pension income to £288-a-week between them, higher than the current £176.15 for married couples if the spouse has no NI or an incomplete NI record. However, both partners would need 35 years of NI each to get the full £288.
The reforms will also put an end to payments made to spouses who are widowed before they reach state pension age, as currently they may be entitled to some of their late partner's basic state pension.
With the second state pension (S2P) also ending, it will mean spouses will no longer be able to inherit a portion of their partner's S2P payments when they die.
Financial hit: Spouses are currently entitled to a top-up worth £66-a-week, but this will end come 2016. Why the change?The closure of this so-called 'loophole', according to Steve Webb at least, is in reaction to the growing number of those overseas who are claiming the benefit despite having not contributed to the British economy before.
He said: 'There are women who have never been to Britain claiming on their husband's record. There are also men who have never been to Britain claiming on their wife's record.'
The number of overseas spouses who are in receipt of the payment has risen from 190,000 to 220,000 between 2002 and 2012.
Meanwhile while in the UK this has reduced from 2.1 million to 1.7 million, with this figure expected to fall further as more women in particular retire with full NI records.
Who will this affect?Those 1.7 million spouses or civil partners living in the UK who receive this top-up and the 220,000 who live overseas will continue to receive this income until they die, so they won't be impacted.
It will affect those retiring from 2016 onwards, some of whom will have been eligible for the benefit. If some of these have not built up the required NI contributions to get a decent basic state pension, they will no longer be able to rely upon their partner's record to top up their own income.The exception are working women who retained the right after 1977 to pay a special reduced rate of NI, known as the 'married woman's stamp'. This controversial scheme left them entitled only to a basic state pension worth 60 per cent of their husband's, but these payments will continue to be made to those who retire after 2016.Some, including former Downing Street pensions adviser Ros Altmann, have criticised bringing such a sudden curtain down on all claimants.They argue that while younger married women will have the time to build up their state pension entitlements before they retire, there will be those in their late 50s who have not been able to build up state pension rights and who would rely on their husband's record to get the top-up.They say that transitional arrangements need to be brought in to ensure they are not robbed of some form of income in their retirement. It could also have a big impact on those without state pension entitlements whose partner dies in retirement, meaning their state pension payments would stop.