More than 200k parents could miss out on state pension boost say MPs, a week after petition to change the rules hits 10k signatures
- 3% of UK households receiving child benefit may be missing out on NI credits
- This is because the child benefit is claimed by the household’s higher earner
- These credits are put toward state pensions and each one is worth £244 a year
- This is Money has been campaigning since last autumn to change the rules to stop parents from missing out
More than 200,000 parents may be missing out on entitlements which could boost their state pension, a committee of MPs has warned.
Figures provided to the Treasury Select Committee by HMRC estimate that of the 7.9million households in Britain receiving child benefit, around three per cent – more than 200,000 households – may not be benefiting from National Insurance credits.
This is because their child benefit is claimed by the sole earner in the household, and vital state pension credits are therefore failing to go to the partner who isn’t working in order to look after children.
The high profile warning is a victory for This is Money’s campaign on child benefit and the state pension, in which we have been arguing for the link between the two seemingly separate financial issues to be made much clearer to parents.
Child benefit: The Treasury Select Committee reported that over 200,000 parents could be missing out on pension entitlements
This is particularly an issue for couples who never claim the benefit, as they are not entitled to it due to one of them earning more than £60,000 a year.
The high earner charge forces them to repay all child benefit above this level. However, they should still claim the benefit but then not take it to ensure that a parent not working in order to look after a child gets state pension credits.
HMRC figures now reveal the scale of another big problem – the number of people who make an innocent but common error when applying for child benefit, of putting the ‘wrong’ parent’s name down on the form.
Responding to the news that 200,000 parents could be missing out on this account, Nicky Morgan MP, who chairs the Treasury Select Committee and wrote a column for us about child benefit and the state pension, said that ‘the Government needs to pull its finger out and make sure people are aware of the issue’.
Couples can apply to transfer credits between them in such cases, but the option is not widely known and parents complain the system for doing this is lengthy and confusing.
Morgan has previously called for the Government to publicise it more widely to parents. We explain how to apply for transfers here.
Nicky Morgan: ‘Now we have an idea of the scale of this problem, the Government needs to pull its finger out’
Registering for child benefit builds up state pension entitlement for parents of children under 12 who do not already pay National Insurance Contributions, for example, because they stay at home to look after their children.
If the parent does not register for child benefit, they may forgo their National Insurance credits, and therefore part of their future state pension.
In general, people need 35 qualifying years of national insurance contributions to be entitled to the full new state pension.
The snapshot figures indicate many parents may not get their full state pension entitlement as they may build up insufficient qualifying years.
Campaign: Former Pensions Minister Steve Webb’s petition hit 10,000 signatures last week
Last week, former Pensions Minister and This is Money columnist Steve Webb’s petition, which calls for parents to be handed back pension credits lost by not signing up for child benefit, reached 10,000 signatures.
This means the Government will be forced to respond to it.
This is Money has backed Webb’s petition, which came after we launched a campaign last autumn to fight for justice for these parents and those who make simple errors on child benefit forms.
Since then we have heard from parents who stand to lose tens of thousands of pounds in old age, thanks to a 2013 overhaul of child benefit.
Parents who earn too much to qualify for child benefit still must apply for it in order to receive state pension credits.
Each annual credit is worth around £244 per year in state pension, or £4,880 over the course of a typical 20-year retirement.
However, parents are currently only able to backdate credits by three months when they make a belated child benefit claim.
Webb, who is now policy director at Royal London, said: ‘It is great news for our campaign that more than 10,000 people say that they want the Government to fix the broken system around child benefit and National Insurance credits.
Have you lost state pension by not signing up for child benefits or filling form in wrong?
If this has happened to you, contact firstname.lastname@example.org and tell us your story.
‘But unless the Government gives in, we will be redoubling our efforts to highlight this unfairness and will keep up the pressure until we can get things changed to the benefit of thousands of parents and young families.’
Nicky Morgan, who chairs the committee, said: ‘The Treasury Committee has long-warned the Government of the risk that for families with one earner and one non-earner, that if the sole earner claims child benefit, the non-earner, with childcare commitments, forgoes national insurance credits and, potentially therefore, their entitlement to a full future state pension.
‘New figures today from HMRC show that over 200,000 parents may be in this situation, and therefore missing out on their pension.
‘Now we have an idea of the scale of this problem, the Government needs to pull its finger out and make sure people are aware of the issue and know how to put it right.’
Readers who support our campaign can sign Webb’s petition here.