Full-time mothers to get state pension

STAY-at-home mothers are to receive a full state pension for the first time under a radical overhaul of the retirement system.

The changes will also entitle full-time carers to pension payments that could benefit them by £2,000 per year.

Under the current system only those who work for 30 years qualify for the full basic state pension. The reforms will mean that mothers and carers will be treated as though they have worked throughout their lives.

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However, the change to the current system is also expected to hit wealthier workers as the state second pension will be scrapped.

The move, announced by Work and Pensions Secretary Iain Duncan Smith, will be applied retrospectively from 2015, giving an average of £40 extra a week to mothers who took time out of work to raise a family.

Duncan Smith said women would be the “major winners” in the new system, which will mean that everyone who cares for others will receive a flat-rate payment worth at least £140 per week.

He said: “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 programme, massively.”

However, the changes will also prevent people from opting out of the second state pension scheme in order to put extra money into a company scheme. It will mean they will not receive a discount in their National Insurance contributions, meaning the value of their pensions may fall. Currently workers can choose to opt in or out of the additional state pension.

However, Duncan Smith defended the change, saying most workers would be left better off under the new system, and criticised the current one as chaotic. “Nobody understands how it works. It acts as a major disincentive to save.”