Stay-at-home mums missing out on pension equality


According to analysis by Royal London, as many as 50,000 stay-at-home mothers could be missing out on thousands in retirement income, due to changes made to the way Child Benefits work five years ago.

What is happening?

The change has meant that, in couples where one person earns over £50,000, the other is ineligible for Child Benefits, even if they are a stay-at-home parent.

However, for stay-at-home parents, there’s more to Child Benefits than just money; they are also entitled to National Insurance credits, which are required to claim a State Pension in later life.

What are National Insurance credits?

To qualify for the Full State pension, an individual needs to have 35 qualifying years. These are years where they have made National Insurance contributions through employment, voluntary contributions or National Insurance credits which are included in some state benefits, including Child Benefit.

The State Pension can be claimed on a minimum of 10 years of contributions, however it will be much lower than the full state pension. Any fewer qualifying years, and no State Pension will be available.

Credits allow people who are not working to maintain a healthy National Insurance record.

Why does it matter?

For those years when a stay-at-home parent is not working, they will not be making National Insurance contributions through employment. So, they must either make voluntary contributions or rely on their benefits to fill the gaps in their National Insurance record.

Without claiming the National Insurance credits they are entitled to, stay-at-home parents will find themselves with a retirement income which does not provide enough to live on.

In addition, being out of work for a few years will impact the family’s ability to save for retirement. Where most people have been automatically enrolled into a Workplace Pension and will rely on that to form the bulk of their retirement income, stay-at-home parents have no such luxury.

What are the options?

For stay-at-home parents, the pressure will be on to balance both short and long-term finances. Even in families where one parent is earning more than £50,000, it may still be challenging to support two adults and children on a single income, as well as saving enough to support two adults in retirement.

So, what can you do to make it easier?

There are a few options:

Claim Child Benefits: You can claim the benefit, even if you are not eligible. The full amount will be paid to you but will then be reclaimed by the Government in the form of Income Tax. However, you will be able to retain the National Insurance credits.

Check your National Insurance record: You can only effectively plan for retirement, if you know what you are likely to receive when you get there. You can check your National Insurance record here.

Make other sacrifices: Relying on a single income to support a family as well as saving enough for two people to retire may mean cutting spending in other areas. We’re not suggesting you stop doing everything that makes you happy but restricting your budget will help you to put more to one side for the future.

Maintain Workplace Pensions: If you leave employment to become a full-time parent, it can be worth keeping your former Workplace Pension open and making contributions from your partner’s income into it. While you will no longer receive employer contributions, you may benefit from potential tax relief.

Open a Lifetime ISA (LISA): Lifetime ISAs are only available to those aged 18-39, but once opened, you can continue to contribute up to £4,000 per year. Your contributions will attract a 25% government bonus, as long as the money is only used for a house deposit or taken as retirement income when you reach 60.

Save before having children: If you have not yet started a family, but already have plans to stay at home when you do have children, you should take advantage of the current opportunities. The years before starting a family are the prime time to work on your pension. Take advantage of the fact that you are currently bringing home two incomes and save as much as possible for the future.

For more advice, help and information surrounding retirement planning, no matter your current circumstances, get in touch with Sarah or Bev on 0115 933 8433.