MPs urge govt to warn on loss of pension benefits

MPs urge govt to warn on loss of pension benefits

Treasury committee chairwoman Nicky Morgan has accused the Department for Work and Pensions of not doing enough to protect state pensions for low or no-income parents.

In a letter to Esther McVey, secretary of state for work and pensions, Ms Morgan said the DWP needed to do more to inform parents with low or no income that they can protect their future state pension entitlement by transferring National Insurance credits from a partner who claims child benefit.

Ms Morgan’s letter comes in response to Ms McVey’s statement earlier this month urging people to check that they are eligible for credits that may improve their state pension.

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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.

In the letter, Ms Morgan highlighted the risk that non-working parents may miss out on National Insurance credits, and therefore their state pension entitlement, if they are unaware that their partner’s surplus credits can be transferred to them.

The parent who does not claim child benefit will not receive National Insurance credits for state pension purposes.

Ms Morgan said: "Households can either change the child benefit claimant from the earning-parent to the parent with low-or-no income, or the earning-parent is able to stay as the claimant and just the National Insurance credits can be transferred to the parent with low-or-no income.

"DWP must do more to inform parents that either option will ensure that parents with low-or-no incomes don’t miss out on their pension entitlement."

Rachael Griffin, tax and financial planning expert at Quilter, described the child benefit system as a ‘minefield’, adding: "Parents missing out on national insurance credits could face a reduction in their final state pension and consequently (be) less well off in retirement."

She said while the government was unlikely to be making sweeping reforms to the system any time soon, there are some improvements to the process in the pipeline.

Ms Griffin said: "Presently, the government is in the process of migrating the current child benefit data from the existing Department for Work and Pensions IT system across to a more modern system within HMRC.

"With this set to be delivered in 2019, we are hopefully going to see the process of claiming national insurance credits at least made easier and more streamlined."