State Pension 

Parents unaware of child benefit pension link

Parents unaware of child benefit pension link

Not many parents are aware that they can get national insurance credits which count towards the state pension through child benefit, new research has shown.

In a report out today (June 6) HM Revenue & Customs stated people had a good understanding of most aspects of child benefit but parents had less knowledge of the high-income charge and very little knowledge of the additional benefits of claiming the benefit, such as NI credits.

HMRC had interviewed 45 families.

It stated after making people aware of the link between claiming child benefit and national insurance credits, one person who had not claimed changed their mind and said they would query their position with the taxman.

The person told HMRC: "I have no pension and might have to rely on the state pension… I’m gutted I didn’t know this."

On the other hand, a handful of respondents voiced doubt about whether they would claim the state pension, so they didn’t feel that the potential for obtaining national insurance credits would influence their decision on whether to claim, the report added.

In 2013 the government introduced a high-income child benefit tax charge for couples where one partner earns £60,000 per year or more, which effectively wipes out the value of the child benefit and may deter some couples from signing up.

HMRC announced today that it has issued refunds worth £1.8m after it reviewed cases where taxpayers failed to register for the high income child benefit charge.

HMRC reviewed 35,000 cases where a ‘failure to notify’ penalty had been charged and cancelled the penalties of more than 6,000 customers who had a reasonable excuse for not notifying their liability for the tax years 2013-14, 2014-15 and 2015-16.

Customers will have their penalty refunded or cancelled in two situations: if their income increased to over £50,000 since charge was introduced in 2013, and they have not made a new claim to child benefit since, or if they had income over £50,000, were not in self-assessment, and started a new relationship with a child benefit recipient between 2013 and 2016.

Child benefit recipients with a child under the age of 12 get 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.

According to calculations from Royal London, one year of missed contributions can reduce state pension rights by 1/35 of the full rate.

This is about £244 per year of lost pension or £4,880 over the course of a typical 20-year retirement for each year of contributions missed. 

A mother who started a family in 2012 and has not claimed child benefit in each year from 2012/13 to 2017/18 could have lost up to six years' of credits, reducing her annual state pension by £1,464, a total of almost £30,000 in lost pension through her retirement.