State Pensions: Stay at home mums no longer penalised


Work and Pensions Secretary, Iain Duncan-Smith, has announced that stay at home mums will no longer be penalised when the time comes to draw their State Pension.

At present many stay at home mums, as well as carers, do not qualify for a full State Pension as they have not paid National Insurance contributions for the required 30 years. However, under new reforms it seems as though both groups will now qualify for a full State Pension.

Flat rate State Pension from 2015

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The reforms will see a new flat rate State Pension introduced, at a rate of around £140 per week, for all, including it seems stay at home mums and carers.

The new flat rate State Pension will be introduced from 2015 and available to anyone retiring after this date, however existing pensioners will not be affected and they will remain under the old system.

At present stay at home mums and carers receive lower State Pensions because they only get National Insurance credits for the years they are actually in employment. The new system will change this and could lead to an additional £40 per week for the groups affected.

Mr Duncan-Smith said that these groups would be “major winners” from the new legislation

Flat rate State Pension losers

Financial experts have however pointed out that there will also be losers from the introduction of the flat rate State Pension.

As part of the changes the State Second Pension (S2P), previously known as the State Earnings Related Pension (SERPS), will be abolished. People could previously opt out of S2P and SERPS and have a proportion their National Insurance contributions redirected to their own pensions. It is possible that those people who opted to do this could have received higher pensions than they will do under the new flat rate State Pension.

Existing State Pension system too complex

When talking about the existing State Pension Mr Duncan-Smith said: “Nobody understands how it works. It acts as a major disincentive to save. It penalises women, just for doing the most important thing in the world, which is to make sure that their families (are cared for).”

He continued: “This is hugely beneficial for women who have a broken record of employment. The really critical point is right now they don’t get recognised in the system. But under this system they could build up full points.

“So caring in itself will carry, for the first time ever, a value, and this will be of major benefit to women. Women will be the biggest single beneficiaries from this program, massively.”