As it stands, tens of thousands of people, mostly mothers will be missing out on all or part of their future state pension payments and it is estimated that this number is growing by about 20,000 every year.
The amount of state pension to which we are each entitled is based on the number of years of national insurance contributions. One of the advantages of child benefit payments is that they provided national insurance credits adding to the future state pension entitlement for the stay at home parent.
The High Income Child Benefit Charge ("HICBC") was introduced in January 2013 and has had a big impact on families and their decision not to claim child benefit.
Under HICBC, if either partner has an income over £50,000, the tax charge will reduce and over £60,000 will wipe out any benefit. The benefit is payable to the lower earner but the tax is bourne by the higher earner.
Since the introduction of HICBC, many families are deciding that they will not clam child benefit and many new families do not submit a claim. This is where the problem lies.
For stay at home parents, usually mothers, registering to claim child benefit provides a National Insurance credit. The number of years that a parent stays at home varies from family to family, but is typically many years and can make a sizable impact on pension entitlement.
This impact on pension entitlement should be considered when deciding whether or not to claim child benefit.
More importantly, new families must make a child benefit claim.
Having made a claim, it is still possible to decide not get the payments, but it does ensure;
- national insurance credits that count towards the state pension, and
- the child being registered and issued with a National Insurance number when they turn 16.
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