MPs highlight risk of stay-at-home parents losing out on pensions

In Spending Review 2010, the Government announced that it would remove Child Benefit from households with a higher earner. For couples where one partner earns between £50,000 and £60,000, a progressively rising tax charge is incurred. At incomes over £60,000, the tax charge wipes out the value of the Child Benefit entirely.

Registering for Child Benefit builds up entitlement to the state pensions for parents of children under 12 who do not pay National Insurance contributions (e.g. because they decide to stay at home to look after their children). If the parent doesn’t register for Child Benefit, they may forgo their entitlement to National Insurance Credits, and therefore part of their future state pension.

When the tax charge was introduced in January 2013, HMRC wrote to affected households asking if they wished to opt out of receiving the benefit. Those who opt out continue to get the National Insurance Credit required for the full state pension. However, parents who have started a family since January 2013 may have seen no advantage in registering for Child Benefit due to the tax charge. These families—for instance, consisting of a higher earner and one stay-at-home parent—could be missing out on the National Insurance Credits required for a full state pension.

Statistics show a limited number of opt outs of new Child Benefit claimants, and an increase in the proportion of male Child Benefit claimants.

Nicky Morgan, chair of the Treasury Committee, has written to the financial secretary to the Treasury to ask how many people have been affected, how HMRC is informing those who may have their pension entitlement affected, and whether HM Treasury has undertaken any analysis.

Nicky Morgan said: "It’s concerning that parents who haven’t registered for Child Benefit for fear of the higher tax rate charge may be forgoing part of their future state pension. This is exemplified by the limited number of new opt-outs of Child Benefit claimants.

"The Committee will scrutinise HMRC’s Child Benefit consumer research to understand the scale of this risk.

"The data provided by HMRC also shows that the proportion of male claimants of child benefit has increased. A shift in Child Benefit applications from mothers to fathers, where there is no underlying change in household formation, who earns or childcare responsibilities, represents a potential future pension problem.

"There is a risk—to any household with one person earning and one person not earning but undertaking childcare commitments—that if the sole earner claims Child Benefit, the non-earner, with childcare commitments, forgoes National Insurance credits and, therefore, their entitlement to a full future state pension. The Committee has asked HMRC to provide it with any analysis of this risk.

"Parents can transfer National Insurance credits between themselves without transferring who receives the money, but HMRC does not monitor the number of transfers. This is concerning, so the Committee has asked HMRC what work it has done to publicise the possibility of National Insurance credits transfer."