Half a million women who took time off work to bring up children have been told that they may have been short-changed by up to £1 billion on their state pensions.

The Government admits that large numbers of women could be missing out on home responsiblities protection (HRP) - a scheme designed to help women with gaps in their national insurance contributions (NICs) record because they took career breaks to care for children.

It is also writing to more than 70,000 married women who have gaps in their NICs between April 1996 and April 2002, offering them the chance to buy back their missing years at a discounted rate.

Who could have missed out on HRP?

HRP reduces the number of qualifying years to receive a full state pension, from 39 to 20, for women who have taken time off work to bring up children. The protection should have been given automatically to women who were not working and receiving child benefit after April 1978, when the system was introduced. But poor record keeping and flaws in the system meant that this did not happen. Anyone who was out of work, caring for children, between May 1978 and May 2000 could be affected.

What went wrong?

Until May 2000 a woman claiming child benefit did not need to include her national insurance number on the benefit form. When her national insurance record is assessed there may, therefore, be no indication that she received child benefit in some years and should qualify for HRP.

Mike Warburton, of Grant Thornton, the accountant, says: “Before the national insurance number was necessary for claiming child benefit, it may be that the contributions agency and the department that administered the child benefit failed to communicate effectively.”

Who qualifies for HRP?

Women who have stopped work since May 1978 to bring up children and claimed child benefit, or who spend at least 35 hours a week caring for a long-term sick or disabled person. Since 2003 HRP has also been available to foster carers.

Women who married before 1977 and elected to pay the reduced rate of national insurance qualify for HRP once they have been off work for two years.

How much do I need for a full pension?

Women who retire before 2010 and qualify for 19 years of HRP still have to work for 20 years and pay NICs to receive the full state pension.

From April 2010 HRP will be replaced by a system of credits for parents and carers, which will count towards your state pension entitlement. A person will be able to build up entitlement to a basic state pension on the carer's credit alone. This will coincide with a reduction to 30 in the number of qualifying years needed for a full pension.

What should I do?

If you are over 60, or within four months of retirement, call the Pension Service on 0845 6060265 or 0845 3000168 and ask for a BR1 form, or visit thepensionservice.gov.uk.

When you receive the form, contact the Pension Service and ask whether your state pension is calculated with the benefit of HRP. This is the time to raise any queries you may have. The Pension Service should investigate on your behalf and arrange any repayments.

Who benefits from the discount rates on gap-year payments?

Women who have gaps in their NICs between April 1996 and April 2002 are able to buy back their missing years at a special rate of between £300 and £350 - even if they have retired.

Any improvements they get to their state pension as a result will be backdated to when they first drew it. This means that women who have retired could qualify for a lump-sum payout of about £1,400.

However, you need to act quickly. Some women have only until April 5 next year to benefit from the special terms.

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