The Government has today announced a plan to address a longstanding issue which was expected to cause many mothers to fall short of a full state pension.
Since the High Income Child Benefit Charge was introduced in 2013, the number of families claiming Child Benefit has dropped every year. In August 2012 the number of families on Child Benefit stood at 7.9 million but this has now dropped to 7.0 million. Those who have decided not to claim are typically higher income couples who have decided that claiming child benefit and incurring a tax charge for the same amount was a waste of time.
But there is a risk that if they simply make no claim at all they will miss out on the valuable National Insurance credits which go to those who get Child Benefit for a child under 12. Parents do have the option to claim just the NI credits (and not the cash) but many simply do not claim at all. Crucially, where people realise they have missed out they can put in a Child Benefit claim but under current rules it will only be backdated for three months.
However, today, the Government has announced a range of technical changes to tax and related issues and has indicated that it finally plans to address this issue. The Government has said:
“National Insurance credit changes: The government recognises concerns that some parents who have not claimed Child Benefit could miss out on their future entitlement to a full State Pension. The government will address this issue to enable affected parents to receive a National Insurance credit retrospectively. Further detail on next steps will be available in due course”.
If effective action is taken, it should be possible that those who have missed out on credits could now be awarded them and fill gaps in their National Insurance record. Details on how this will be done are now awaited.
Commenting, Steve Webb, partner at LCP who has campaigned on this issue for several years said:“Today’s announcement is extremely welcome. Whilst it is understandable that some parents may choose not to claim Child Benefit payments, it is vital that parents do not damage their state pension as a result. Until now the problem has been that there was a 3 month time limit on backdating of Child Benefit claims, meaning that the damage would be permanent. I am delighted that the government has finally listened to campaigners and plans to make changes which will boost the state pension of thousands of parents, and particularly many mothers who might otherwise have missed out”