Thousands of women due to retire soon are being urged to seize a last chance to top up their state pension entitlement. Of the 180,000 women who reach state pension age next year, the Department for Work and Pensions (DWP) says that 20,000 — one in nine — could get a full state pension if they take action now. Thousands more could boost the amount they receive by making top-up payments before they retire.

While the percentage of people saving adequate amounts into a private pension has risen in the past year, Scottish Widows has found that only 47 per cent of women save adequately for their old age. This compares with 59 per cent of men.

The DWP is concerned that many of these women are under the impression that they have left it too late to make a difference. But a change in the rules means that a full state pension could be in reach.

The amount you receive depends on how many years you have made national insurance contributions (NICs). To receive the full state pension of £95.25 a week, women need 39 qualifying years, a target most do not reach. However, from April 6 next year, men and women will need only 30 NIC years to qualify.

Entitlement depends on when you reach state retirement age and not when you actually retire. So, any woman who reaches 60 on or before April 5, 2010, will need 39 qualifying years, while women whose 60th birthday falls on April 6 or later will need only 30. Even when the number of qualifying years falls, many women will still not have enough NIC years to entitle them to the full pension.

However, it is possible to buy back the previous six years of missed NI contributions. As an extra encouragement, women who reach state pension age before April 5, 2015, and who have 20 years on their NI record, are being allowed to buy back up to six more years, going back to 1975. The policy also applies to men, but women will make up about 90 per cent of those who will benefit, the DWP says.

It is not a decision to be taken lightly as it currently costs £626.60 a year to “buy back” your NIC years. Malcolm McLean, the chief executive of the Pensions Advisory Service, says: “Generally speaking it is a good deal and is certainly worth doing if you have a reasonable life expectancy.” But he says that it may not make sense if you expect to qualify for the pension credit — top-up payments will reduce the amount you will get.

The means-tested credit ensures that men and women on low and middle incomes are entitled to £130 a week in state pension. If buying back years will not leave you much better off, it may not be worth it.

In addition, a married woman who has not accumulated enough qualifying years to receive a full state pension is entitled to 60 per cent of her husband’s pension. If he is drawing a full pension, she will receive £57.15 a week.

Home responsibilities protection (HRP) must also be taken into account. This reduces the number of NIC qualifying years to 20 if a woman has spent time at home since 1978 caring for children. It is being replaced from April 6 next year by a new weekly NIC credit for those bringing up children to the age of 12, and for those who spend at least 20 hours a week caring for severely disabled people. The years before April 6 that were covered by HRP will be converted into years of credit (the credits treat you as having paid a qualifying NIC).

Although you do not have to apply for HRP — it is given automatically — you should get a forecast from the Pension Service (thepensionservice.gov.uk) to ensure that you have been allocated the right amount of credit.

Women who are some years from retirement are also being urged to reassess their pension plans after a Scottish Widows’ report found that about 26 per cent who could afford to pay into a private scheme — a personal pension or company scheme — do not. Fifteen per cent of men are in a similar position.

Ian Naismith, head of pensions market development for Scottish Widows, says that women want to put more aside for retirement, “but that doesn’t seem to be translating into increased savings. Year on year our findings have exposed women as the pensions underdogs.”

Women have always found it more difficult to save for their old age because they are more likely to take a career break to bring up children and they tend to earn less than men. Debt is also proving to be a barrier. On average, women owe about £1,000 more than men on credit cards, store cards and loans. They owe, on average, £12,156 in non-mortgage debt, compared with £11,080 for men.

Saran Allott-Davey, of Heron House Financial Management, an independent financial adviser, says that women — and men — need to think beyond pensions. She suggests a combination of strategies, saving into cash and equity Isas and not just focusing on pensions. “That way you can defer taking your pension until you are, say, 70, by which time it will have had more time to grow and annuity rates should be higher. You could also supplement your income doing part-time work, which need not be arduous.”

Case study

Like many women, Camilla Hayward, 53, is approaching retirement without a pension.

The self-employed tennis coach and administrator from Aylesbury, Buckinghamshire, has never found it easy to save. In her early twenties she worked for an educational publisher and says that a pension was “the last thing” on her mind.

After she had children she didn’t earn enough as a part-time teacher to qualify for the pension scheme. “Any spare money I had has gone into Isas and a house in France,” she says.

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