HMRC doing nothing about women's lost pension credits

The revelation prompted Royal London to accuse HMRC of doing "nothing" about the problem, and call on the government to take "urgent action" to rectify it.

The rule in question is the High Income Child Benefit Tax Charge.

Introduced in January 2013, it applies to couples where one partner earns more than £60,000 a year.

Judging that these families do not need the welfare payment, HMRC wipes out the value of child benefits through a tax.

Mothers in this category are still supposed to claim child benefits, because doing so ensures they receive National Insurance credits towards their state pension.

But the new figures, published on Friday (24 March), show many are not claiming it.

These new figures are a damning indictment of a system that is no longer working for families.Sir Steve Webb

Since the introduction of the rule in 2013, the number of children in receipt of child benefits plunged from 13.8 million to 12.9 million.

It was the first time the number in receipt of child benefits had fallen since 2004.

Based on these figures, Royal London estimated the number of women missing out on state pension credits had more than doubled over the last two years, and now stood at around 50,000.

The provider estimated that five years of lost pension credits could cost a woman £1,000 per year in retirement, or a total of £20,000 for a 20-year retirement.

Royal London pointed out child benefit claims could only be backdated for three months, meaning lost pension credits could never be recovered.

Sir Steve Webb, director of policy at Royal London, said: "Tens of thousands of mothers with young children are missing out on vital state pension rights. This risks setting back the cause of equality for mothers by a generation.  

"HMRC were alerted to this problem last year and have done nothing about it. These new figures are a damning indictment of a system that is no longer working for families.

"The government needs to take urgent action to ensure that mothers get the pension protection to which they are entitled."

Claire Walsh, a Brighton-based chartered financial planner with Aspect 8, said she knew a number of women who had been caught out by this rule.

She said the current system was "ridiculous" and needed to be changed entirely.

She said so far the government had failed to take the problem seriously. 

"It's one of those overlooked things that hasn't really been thought of. People always used to claim child benefits, so it was covered."

She added: "The cynic in me says the government might view this as a saving."

A government spokesperson said: “We have always been clear that families can submit the child benefit claim form to help protect their future right to the state pension.

"We provide specific information to all new mothers and on gov.uk. If anyone is worried about their National Insurance record, they can contact HMRC at any time to check how many years of credits and contributions they have built up."

james.fernyhough@ft.com