Friday 30 September 2016

Mums, act now - or risk losing out on your state pension

Published 27/03/2016 | 02:30

'The scheme ignores any years spent looking after children (under the age of 12) in the home when working out your yearly average of social insurance contributions' Stock photo
'The scheme ignores any years spent looking after children (under the age of 12) in the home when working out your yearly average of social insurance contributions' Stock photo

Stay-at-home mums and mumpreneurs are in danger of losing out on their State pension - unless they take steps now to address the issue.

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There are two types of State pension - contributory and non-contributory. You get more money from the contributory pension than the non-contributory one. Furthermore, the contributory pension is not means-tested.

However, you may not qualify for the full contributory pension if there is a long gap in your social insurance record. This could arise if you looked after children full-time in the home before 1994 - or if you don't pay enough PRSI when self-employed.

If you are self-employed and earn less than €5,000 a year, you don't have to pay PRSI. However, to ensure you still qualify for the contributory State pension, you can make voluntary social insurance contributions of €500 a year (although you must do so within a certain time).

In 1994, the Government introduced the homemaker's scheme to make it easier for stay-at-home parents to qualify for a contributory State pension.

The scheme ignores any years spent looking after children (under the age of 12) in the home when working out your yearly average of social insurance contributions.

However, the scheme does not cover any years that may have been spent looking after children before April 6, 1994. Furthermore, once your youngest child turns 12, you no longer qualify for the homemaker's scheme (unless your children are ill or disabled).

So you may need to consider returning to work at that stage to ensure you don't build up a gap in your social insurance record. (Remember, you may be entitled to a widow's State pension should your partner pass away before you do).

Working mums about to head off on maternity or parental leave should ask their company for advice on how to maximise company and State pension benefits while off, advised Rachael Ingle of Aon Hewitt.

"Also, when you return from maternity leave, ask your employer to complete the application form for maternity leave credits - to maximise any future State pension entitlements," added Ingle.

Sunday Indo Business

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