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50,000 mothers putting pension at risk by not claiming child benefit

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27/03/2017
Tens of thousands of mothers are missing out on vital credits towards their future state pension because they are not claiming child benefit.

Mutual insurer Royal London said the number of women missing out unnecessarily on vital pension rights has more than doubled in the last two years to around 50,000.

The increase is down to a change to the rules on claiming child benefit, which came into force in January 2013.

The High Income Child Benefit Tax Change means couples where one partner earns more than £60,000 a year have the value of their child benefit wiped out by a tax charge.

As a result, growing numbers of mothers have declined to claim child benefit at all.

A report published by HMRC on Friday shows the number of children for whom child benefit is being paid is now at its lowest level since HMRC began producing these statistics in 2003.

Royal London said this means mothers are missing out on vital national insurance credits towards their state pension.

The firm said each year missed could cost 1/35 of the value of the state pension – around £231 a year or over £4,600 over the course of a typical 20 year retirement.

How child benefit protects national insurance record

Receiving child benefit for a child under 12 is one way for parents taking time out of work to raise their children to protect their national insurance record.

Women who opt out of child benefit can continue to get national insurance credits towards their state pension. But women who choose not to claim in the first instance miss out on contributions.

Royal London said a woman who started her family in 2013 and decided not to claim child benefit could have missed out on state pension credits for five years so far (2012/13 to 2016/17 inclusive). The total loss over those five years could be over £1,000 a year in retirement.

Over the course of a 20 year retirement, these women could be more than £20,000 worse off in total.

Steve Webb, director of policy at Royal London, said: “Tens of thousands of mothers with young children are missing out on vital state pension rights. This risks setting back the cause of equality for mothers by a generation.

“HMRC were alerted to this problem last year and have done nothing about it. These new figures are a damning indictment of a system that is no longer working for families. The government needs to take urgent action to ensure that mothers get the pension protection to which they are entitled.”

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