HUNDREDS OF THOUSANDS of parents could be as much as £66,000 better off following a major change to child benefit rules.
The Treasury announced today (January 16) that from 2026, parents will be able to claim National Insurance (NI) credits for years in the past where they didn’t claim child benefit.
Thousands of parents could be missing out on state pension entitlementAlamy
Normally you can only backdate a child benefit claim for three months, but the proposed changes will allow parents to backdate claims to 2013.
Anyone who claims child benefit can tick a box on their form to claim NI credits for the years they aren’t working.
This means their NI record won’t have gaps in, which could reduce the amount of state pension they can get in retirement.
Many parents stopped claiming child benefit due to the high income child benefit tax charge, so they missed out on these credits.
The high income benefit charge, introduced in 2013, means parents where either they or their partner earn over £50,000 and claim child benefit are charged by HM Revenue & Customs (HMRC).
The amount they are charged is on a sliding scale up to earnings of £60,000, at which point they would end up with a bill matching the amount of child benefit they receive.
Unsurprisingly, thousands of families have stopped claiming child benefit since 2013, as they would just receive a tax bill for the same amount.
This has meant thousands have missed out on vital NI credits over the last decade, which could impact their state pension entitlement as they won’t have built up enough qualifying years to get the full amount.
While anyone could be affected, it tends to be women who have missed out as they are more likely to have taken time off work to care for children.
The Treasury has finally announced plans today to allow those who didn’t claim child benefit in the past to apply for the NI credits for the years they missed.
Crucially, they will be able to backdate their claim to 2013, when the high income benefit charge was first introduced.
So, if someone started a family in 2013 – when the high income benefit charge came in – and therefore chose not to claim child benefit at all, they could have lost out in 11 years’ worth of credits in total.
Over the course of a 20 year retirement, they could lose out on £66,629.
Last year, the government confirmed half a million parents had stopped claiming child benefit since 2013 due to the high income benefit charge.
According to former pensions minister Steve Webb, hundreds of thousands of families could therefore potentially benefit from the change announced today.
“It’s welcome news that the government is finally going to address the problem of parents missing out on vital credits towards their state pension,” he said.
“It is vital that the new system will be simple to access and widely publicised so that it reaches all those who are currently at risk of a shortfall in their state pension.
“While the announcement is welcome, it is extraordinary that we have had ten years in which people’s state pension records have been damaged by the impact of the high income child benefit charge.
“Now, the government has had to invent another system to fix the problems caused by their own policy.”
Unfortunately, parents will have to wait until 2026 before they can start claiming credits for any years they’ve missed.
Mr Webb, now partner at consultancy LCP, explained this is because the government will have to draw up the legislation and create the new system.
Financial secretary to the Treasury Nigel Huddleston said: “The government will legislate to introduce a route for people to apply for NI credits for parents/carers for tax years where they have not claimed child benefit, to ensure they do not miss out on their state pension entitlement.
“Transitional arrangements will ensure those affected since 2013 are still able to claim.”
He added that going forward, applications will be available for six years following the relevant tax year.
Can I claim NI credits?
If you stop paid work to look after children under 12, you can claim NI credits to ensure your state pension entitlement is not affected.
You need 30 qualifying years of NI to get the full basic state pension – currently £203.85 a week – either through contributions made by working or credits.
So, if taking time off work means you’ll get less years than this, it’s worth getting the credits.
Visit the government website to start making a child benefit claim or you can download the paper form here.
You don’t need to claim child benefit to get the credits – you just need to say so on the form.
The relevant question is number 62 on the paper form, which says: “I do not want to be paid Child Benefit, but I do want to protect my State Pension”. Tick the “no” box next to it.
If you fill out the paper form, you need to sign and date the form and post it back with the documents requested to: Child Benefit Office (GB), Washington, NEWCASTLE UPON TYNE, NE88 1ZD.
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