Mums failing to claim child benefit tax credits will miss out on the full state pension, according to a former minister.
Steve Webb, who was the Liberal pensions minister in David Cameron’s coalition government, says women are set to lose hundreds of millions in state pension payments because they are not bothering to claim child benefit.
If they do and their spouses earn £60,000 or more a year, they face HM Revenue & Customs clawing back some of their child benefit.
If they do not claim child benefit, their families pay no tax penalty but they miss out on national insurance credits that go towards their state pensions.
Shrinking retirement incomes
Webb calculates each year of lost NI credits costs a mum 1/35 of the value of their state pension- currently worth £231 a year or £4,600 across a typical 20-year retirement.
With some mothers looking after two children, they could lose five years of NI pension credits that could shrink their state pensions by £1,000 a year or £20,000 during retirement.
Webb, now director of policy at financial firm Royal London, estimates at least 50,000 mums are caught in the state pension trap.
As child benefit claims can only be backdated for three months, they cannot get back their lost years of NI credits.
“Tens of thousands of mothers with young children are missing out on vital state pension rights,” he said.
Damning indictment
“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.”
Mums who do not want to claim child benefit but do want the NI credits towards their state pensions can tick a box on the claim form to protect their state pension qualifying years.
For more information, download the Royal London report Mothers Missing Out On Millions
Child benefit is paid to carers of children aged under 16 and some older children in certain types of full time education.
