'Baffling' rules that deprive half a million women of a pension

Figures reveal that up to 530,000 women are failing to claim thousands of pounds to which they are entitled.

Now the Department of Work and Pensions has been urged to get in touch with them and pay any money owed through a 'top-up' scheme.

MPs said the women were victims of a "fiendishly complex" pensions system and predicted that the Government would end up paying out billions.

In order to qualify for the lowest level of state pension, a person must make National Insurance contributions for 25 per cent of his or her working life.

For a woman, the standard working life is currently 39 years, which means she would have to work for about nine years to receive onequarter of the £87.30 state pension - about £22 a week.

Government figures show about 530,000 women between 60 and 69 do not receive any state pension because they fail narrowly to satisfy the '25 per cent' test.

Yet under a Whitehall scheme launched in 2004, those who did not pay NI contributions after 1996-97 could "top up" any years needed to meet the threshold, at a cost of between £300 and £400 a year.

This would entitle her to a 25 per cent pension, which works out at about £1,000 a year.

For instance, a 65-year-old woman who missed the 25 per cent threshold by one year could make a one-off payment of up to £400 to qualify for the basic pension.

As it is backdated to the retirement age of 60, the Government would then send her a cheque for nearly £5,000 - £1,000 for each of the five years since she quit work.

However, because the letters the Government sent to the women in 2004 were so complicated, many did not realise what was being offered and failed to take it up.

Of the 470,000 women who received details of the 'buy-back' scheme, only 70,000 - or one in seven - made extra payments.

Steve Webb, the Liberal Democrat MP who has campaigned for pension rights, uncovered the latest figures after asking a Parliamentary question.

He said: "The pensions system is fiendishly complex and far too many people are missing out on money that is rightfully theirs.

"Thousands of women are within a whisker of having a pension in their own right but are getting nothing for the money that they did put in.

"As a matter of urgency the Government must identify these women and alert them in plain English to the pension that they could be receiving."

A Department for Work and Pensions spokesman said: "Women can 'buy back' years missed within six years of the break in their contributions.

"For years missed between 1996-97 and 2001-02 people have until April 2009 to buy those years at the rate they would have paid if the years were bought at the correct time."

However, once a woman's husband has reached 65, she automatically qualifies for a pension totalling 60 per cent of his.

In that case, she would be better off claiming a pension based on his contributions.