State Pension  

HMRC warns parents over state pension

HMRC warns parents over state pension

HMRC has written to the Treasury committee warning 200,000 parents are at risk of foregoing their full state pension due to not claiming child benefits.

Data provided to the Treasury committee by HMRC and published today ( January 23) estimates that of the 7.9 million households in the UK receiving child benefit about 3 per cent (more than 200,000 households) may not be benefitting from National Insurance (NI) credits because the child benefit is claimed by the higher earner in the household.

HMRC explained the consequence was the parent who does not claim child benefit may not automatically receive NI credits for state pension purposes.

HMRC wrote: "Our work suggests there may be around 3 per cent of households claiming child benefit and not benefitting from NI credits because the child benefit is claimed by the higher earner in the household.

"This only arises where there is a child under 12 and the actual claimant’s partner is earning below the lower earnings limit and is not receiving NI credits from another source."

It added: "It does not mean that these individuals will miss out on state pension entitlements. This is because the analysis is a snapshot in time and they may build up sufficient qualifying years over their working life. It is also possible that some of these individuals will be receiving NI credits if they have been transferred from their partner."

Child benefit recipients with a child under the age of 12 get a national insurance credit towards their state pension.

This means even if they are not in paid work, they are still treated as having contributed when it comes to claiming their retirement benefits.

However, stay-at-home parents can only receive these credits if they apply for child benefit but then waive the payment of it.

HMRC analysts produced its estimate of the number of households in this position using the Department for Work and Pensions family resources. The tax office cautioned the data was sample based, and hence subject to uncertainty.

Published National Statistics relating to August 2017 showed the number of UK Child Benefit claimants, including those who have opted out of receiving payments, was about 7.9 million.

Commenting on the correspondence, Nicky Morgan, chairman of the Treasury committee, called on the government to act.

She said: "The Treasury committee has long-warned the government of the risk that for families with one earner and one non-earner, if the sole-earner claims child benefit, the non-earner with childcare commitments forgoes National Insurance credits and, potentially 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."

In September 2018, Morgan urged the Department for Work and Pensions to do more to inform parents on low-or-no income they could be missing out on their future pensions.