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Published on 27 April 2023

LITRG welcomes government move to fix state pension ‘trap’ faced by some parents and guardians

The Low Incomes Tax Reform Group (LITRG) welcomes the government’s confirmation today that it intends to address an issue faced by some parents and guardians who have not claimed Child Benefit and may have missed out on future entitlement to a full state pension as a result.1 However, LITRG urges the government to ensure that those who may become eligible for backdated National Insurance (NI) credits are refunded any voluntary NI contributions made for relevant years.

Press release. A coloured image of a speakerphone, a paper press release and microphone.

Child Benefit claimants are automatically entitled to NI credits for children up to the age of 12. However, some families may have decided not to claim Child Benefit at all. This can often be driven by a desire to avoid having to pay the High Income Child Benefit Charge.2 Unfortunately this can leave a non-working or lower-paid parent out of pocket later down the line, as a lack of Child Benefit claim could lead to gaps in the their NI record and potentially a reduced State Pension later in life.3

Antonia Stokes, Technical Officer at LITRG said:

“We are pleased that the government is looking to address this issue, as it is something that LITRG has called for on several occasions.4 However, at this stage, all we have is a concept – there is little meat on the bones. We therefore urge the government to make sure it considers some potential complications as part of its work in this area.

“A particular concern is how the retrospective award of NI credits will affect those who may have already made voluntary NI contributions to cover the affected years.5 We would urge the government to repay people who might have already made voluntary contributions of many hundreds of pounds to ensure their entitlement to state pension is protected. If they do not, these people may be left financially disadvantaged compared to someone who did nothing at all.

“Another important consideration will be the timeframe for claiming retrospective NI credits. We think this should be as long as possible – or otherwise without time-limit. Our experience suggests that some people do not realise that they have gaps in their NI record until they actually come to claim state pension. For maximum benefit, the government should ensure that people are not time-barred from benefiting from any retrospective credits.”

Notes for editors

  1. As announced in the policy paper: Summary of tax administration and maintenance: Spring 2023.
  2. The High Income Child Benefit Charge is designed to claw back Child Benefit where the claimant or their partner has adjusted net income in excess of £50,000. In situations where the High Income Child Benefit Charge would lead to a full clawback of Child Benefit, it is possible to claim Child Benefit, but elect not to receive payments. In doing so, the associated NI credits are protected. This was/is a point often misunderstood by those eligible to claim Child Benefit.
  3. 35 ‘qualifying years’ are required in order to be eligible for the full new State Pension (see GOV.UK).
  4. For example, see LITRG 2021 budget representation on the High Income Child Benefit Charge. The Office of Tax Simplification also made reference to the problem in their paper Taxation of life events (see recommendation 2).
  5. As it currently stands, if a person has realised that they do not have a qualifying year for state pension purposes as a result of not claiming Child Benefit, their only option to make that year qualifying is to make voluntary NI contributions (if they are in time to do so). In most cases, the individual would have needed to make Class 3 Voluntary contributions – which for the 2023/24 tax year cost £17.45 per week, an annual cost of over £900. 
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