Mothers warned of risk of ‘wasting money’ topping up NI contributions – Steve Webb, LCP

An imminent deadline for filling historic gaps in National Insurance records has led to considerable publicity around the advantages of paying voluntary NI contributions.  But LCP Partner and former Pensions Minister Steve Webb has issued a warning that hundreds of thousands of mothers could be wasting their money if they do so.

The background is the introduction of the ‘High Income Child Benefit Charge’ by George Osborne in 2013.  The new charge meant that although high income parents could go on claiming Child Benefit, the higher earner would also be issued with an additional tax bill, potentially wiping out the value of the Child Benefit.  In response, hundreds of thousands of couples decided that it would no longer be worthwhile to claim Child Benefit, and the number of families on Child Benefit has fallen every single year since 2013.

The problem is that Child Benefit (for a child under 12) automatically brings with it National Insurance credits, helping a non-working parent to build up a full state pension.   When non-working parents do not claim Child Benefit, they create a gap in their NI record.

The Government’s original plan was that parents could get round this problem by completing the Child Benefit claim form but ticking a box to say that they wanted ‘credits only’ rather than a cash payment.  But many parents were unaware of this option.

In response, the last Government announced (see notes to editors) that it would create a new category of NI credit, particularly targeted on those – mostly mothers – who had gaps simply because they didn’t claim the Child Benefit to which they were entitled. 

But until now the new Government had said very little on the subject, and concerns were growing that introducing a new category of credits in 2026 was becoming increasingly unlikely.

However, in a response to a Parliamentary Question from Steve Darling MP, the Government has now confirmed that it will carry through the policy of the previous government and introduce the new credits next year.

Whilst this is good news, it means that mothers who pay (or have already paid) voluntary contributions to fill such gaps could be wasting their money, on the basis that they will get ‘free’ NI credits for those years.   But without full details of who will qualify and for what years, there remains an element of uncertainty.

Commenting, Steve Webb, partner at pension consultants LCP, said:

‘It is good news that the Government has now confirmed it will press ahead with plans to create a new category of NI credits for parents who opted out of Child Benefit because of the High Income charge.   But it also means that parents who were thinking of paying voluntary NI contributions before the 5th April deadline might need to think again, as they are at risk of wasting their money.   It would be helpful if the government set out – as a matter of urgency – precisely who will be entitled to these new credits so that parents know whether or not there is any point making voluntary contributions for these years”