A woman who paid a reduced "married woman's stamp" of National Insurance before taking time off to raise her son has been told by HM Revenue & Customs that her state pension record is correct, after Steve Webb, This Is Money's pensions columnist, investigated her case with HMRC.
The reader wrote to Webb explaining that she had opted to pay the married woman's small National Insurance stamp in 1975, then fell pregnant and had her son in December 1976. She did not resume full-time work until February 1985, when she began paying the full NI stamp.
She said that for the years from 1978 onwards, when Home Responsibilities Protection began, she had not been given credit on her NI record. She referred to an earlier column in which Webb told another reader in a similar position: "Crucially, the ability to go on paying a reduced stamp post 1978 would lapse if there was a gap of more than two years when they did not pay any NI at all." She asked where she could find official information on this two-year rule so that she could pursue a claim to have her state pension increased.
How the married woman's stamp worked
Webb explained that when the National Insurance system was designed after the Second World War, it was assumed that married women would be financially dependent on their husbands, both during their working life and in retirement.
Married women in paid employment had a choice. They could pay full-rate NI contributions and build a pension in their own right, or pay reduced-rate contributions, known as the married woman's stamp, and build no pension for those years. Instead, when her husband retired, a wife could claim a 60 per cent married woman's pension based on his contributions.
The option to elect to pay the reduced stamp ended in 1977. But women who were already paying the reduced rate could continue to do so, provided they did not go more than two years without paying any NI at all, a concession known as the two-year test. It was designed to stop women switching to full contributions too late in life for it to affect their pension rights.
Home Responsibilities Protection explained
Home Responsibilities Protection, or HRP, was introduced in 1978 to protect the NI record of people, mainly mothers, who were not paying into the system because they were at home raising a family.
Women who had paid the reduced stamp were treated as having opted out of building up their own pension, so HRP did not apply in any year in which a woman was still paying, or still eligible to pay, the married woman's stamp.
What HMRC found in this case
After contacting HMRC, Webb said the reader had in fact been awarded HRP for four years, from 1981/82 to 1984/85 inclusive, the period before she returned to work.
He said it was deeply frustrating, an issue he has raised repeatedly with HMRC, that this award does not show on her online NI record, which is the case for anyone who reached pension age before April 2010. Before that date, a year of HRP did not count as a full qualifying year in its own right. Instead, each year of HRP reduced by one the number of years needed for a full pension. In the reader's case, her four years of HRP cut her target from the standard 39 years to 35 years.
Webb said it would help if HMRC simply added a line to online accounts stating that HRP had been awarded and giving the dates, so that people did not have to spend time contacting HMRC to check.
Why 1980/81 was left out
That still left the question of why the reader had not received HRP for 1980/81. Webb noted that if she stopped work in December 1976, then 1978/79 and 1979/80 should have counted as fallow years for NI purposes, causing her married woman's stamp election to lapse and triggering HRP from the following year.
But checking her record showed she had in fact done some paid work during 1978/79. Paying even a small amount of reduced-rate NI that year meant her eligibility to keep paying the married woman's stamp continued for a further year, which in turn delayed her eligibility for HRP by another year.
An HMRC spokesman said: "We're happy to reassure your reader that her National Insurance record is correct and that Home Responsibilities Protection has been correctly applied."
About Steve Webb
Steve Webb is This Is Money's pensions columnist. He was Pensions Minister until leaving the Department for Work and Pensions after the May 2015 election, and is now a partner at the actuary and consulting firm Lane Clark & Peacock. Readers can put pension questions to him at [email protected]. He is unable to answer every question or correspond privately with readers, and nothing in his replies constitutes regulated financial advice.
Readers can also contact MoneyHelper, a government-backed organisation that gives free pensions guidance to the public, on 0800 011 3797.
