Emma Maslin: ‘Do the right thing and add the credits to the missing years of all these thousands of families who have missed out’
A new Government drive urging parents to claim child benefit to avoid losing state pension has prompted a call to fix the current ‘administrative mess’.
An official alert telling parents they ‘may inadvertently be missing out on retirement income’ is missing the point, according to one mum who has already lost four years of credits towards her state pension.
Emma Maslin, 37, (pictured right) who could be nearly £20,000 out of pocket if she lives for 20 years after retirement, is among thousands of parents potentially facing a poorer old age in a scandal recently highlighted by This is Money.
Parents who do not register for child benefit, because one of them earns more than the £60,000 annual threshold above which it is clawed back, are at risk of losing valuable state pension credits for looking after children rather than working.
Instead the Government expects them to register but not take the child benefit payments.
Maslin claims the Government should ‘do the right thing’ and give parents their missing state pension credits back, while also overhauling the current system to prevent more people falling into the same trap.
Former Pensions Minister Steve Webb has also renewed his plea to the Government to fully relax the backdating rules so that parents who belatedly claim child benefit can get back all their lost credits towards a state pension.
At present, you can only get three months’ worth of credits backdated.
The new Government warning, issued by Secretary of State for Work and Pensions Esther McVey, urges parents with children under 12 to ensure they receive valuable National Insurance credits by submitting a child benefit claim, even if they don’t qualify for these payments.
‘Don’t miss out on potentially increased pay-outs from your future state pension. The state pension is a foundation for retirement,’ says McVey. Read more on the Government’s alert to parents below.
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Maslin says: ‘I feel the Department for Work and Pensions are missing a crucial point here – WHY are people missing out?
‘Credits are available to all who have a child under 12 and yet there is a need to actively opt in to receive them.
‘There are surely far easier ways to ensure parents are registered than the current system which is seeing thousands of eligible parents missing out.
‘Why not link registration for state pension credits to the registration of a child’s birth which everyone has to do? Or re-format the form which is required to be filled in – make it an application for state pension credits (available to all) with an opt-in for child benefit (not available to everyone).’
Maslin, who has tried to warn other parents on her Money Whisperer blog, also called for full backdating of state pension credits for those who try to correct the record at a later stage, the way she did.
‘I think it is extremely poor that those who do sign up but only when their children are older still only receive three months of backdated credits.
‘If the budget was there for these credits all along, do the right thing and add the credits to the missing years of all these thousands of families who have missed out because of a poorly managed administrative mess.’
Why is it so important to claim child benefit?
Those who sign up get valuable credits towards their eventual state pension, providing they are not working and building up their National Insurance record that way.
Each credit missed could cost you 1/35 of the value of the state pension – around £244 per year or £4,880 over the course of a typical 20 year retirement. Four years lost works out at £19,520.
It’s crucial a parent who is not working is the one named on the form to get the child benefit, as these credits are worthless to someone employed and already paying enough NI.
You can apply to transfer it later, but couples report being refused this option for reasons they don’t understand and HMRC has so far failed to explain.
Meanwhile, new parents – predominantly women – who fail to sign up because they don’t qualify for the payments can end up losing many years’ worth of credits they can’t get back.
This is because if they discover their mistake and belatedly sign up, HMRC will only backdate their records for three months.
Steve Webb, now policy director at Royal London, says it is good that the Government is highlighting the value of National Insurance credits towards the state pension, but instead of one-off initiatives it should proactively target people using its lists of those who might be affected.
‘In some cases the Government knows with some precision the exact people who are missing out on these NI credits and it should be contacting them personally and directly.
‘For example, the new mothers who have not claimed child benefit will have registered the birth of their child.
‘The Government could easily compare the birth register with the child benefit register and contact the families who are missing out. This would have a much bigger impact than generalised publicity, however well-intentioned.
‘They also need to relax the backdating rules so that those who find out about NI credits late in the day are able to put in a claim covering the years they have missed.’
Nicky Morgan MP, chair of the House of Commons’ Treasury Committee, has also expressed worries and pushed the Government and HMRC to look into the issue of parents losing state pension following changes made in 2013.
The controversial overhaul reduced the entitlement for those earning £50,000-plus a year or wiped it out entirely for those earning £60,000-plus.
But parents who earn too much to qualify for child benefit still have to apply for it so that they receive state pension credits. Those who failed to sign up when the new rules began could have lost six years of state pension credits by now.
In response to the new Government awareness initiative, Morgan said: ‘Treasury Committees, both past and present, have expressed concern about the impact of the High Income Child Benefit Charge on National Insurance credits, and people potentially forgoing part of their future state pension.
‘Today’s announcement from the Secretary of State for Work and Pensions is therefore welcome. The Treasury Committee will continue to challenge the Government to ensure that no-one misses out on these National Insurance credits.’
A recent investigation by This is Money found that even parents who do manage to fill in child benefit forms may still miss out because they are so complicated it can be easy to make a mistake – and there is little forbearance for anyone who does.
Child benefit form: ‘Although the guide and the claim form talk about “protecting” your state pension, it could certainly say more clearly that the person who does not claim could end up with a smaller pension,’ says Steve Webb
Couples tell us they are struggling to sort out old child benefit claims dating back 10 and even 20 years, but getting bogged down trying to convince the taxman to set things straight.
They are being blocked from transferring state pension rights between them when the ‘wrong’ partner signs up for child benefit, and are in the dark about why HMRC has refused them.
HMRC is accused of creating a ‘shambles’ by giving out incorrect information to parents and failing to explain its refusal of appeals to sort things out.
Couples have come forward after reading This is Money columns by Steve Webb about people getting ensnared in ‘nightmare’ child benefit red tape.
This year, he has highlighted problems faced by one woman who lost credits by mistakenly putting her husband’s name first on the child benefit form, and another who like Emma Maslin failed to register because she wasn’t eligible for the payments.
Child benefit errors: Thousands of parents are facing a poorer retirement for failing to fill in a form within three months of having a baby
Meanwhile, it is feared many grandparents taking on childcare duties could also be unwittingly losing credits towards a state pension.
But unlike with parents applying late for child benefit, who only get credits backdated by three months, the Government lets grandparents claim transfers for years all the way back to 6 April 2011.
The recipient must still be of working age, but otherwise the process involves the parent filling in and submitting a form.
HMRC has changed child benefit forms to say claiming ‘can help to protect your state pension’ – but not that you risk losing thousands of pounds in old age if the wrong parent fills in the application, or you omit to claim because you don’t qualify for payouts.
Forms are handed out in ‘Bounty Packs’ in hospitals after births, but parents say these come filled with money-off flyers and promotions and it’s not clear they also contain important documents.
HMRC stresses the importance of parents making a claim for child benefit to protect their state pension, whether or not they are eligible receive the payments.
Customers can find specific information on the child benefit claim form, through the HMRC helpline, online at gov.uk, through partners such as Citizen’s Advice, and in the Bounty packs that go to new parents, it says.
HMRC adds that it continuously reviews its communications to ensure that the right information is available.
What does the Government say about the risks of missing out on NI credits?
Credits can help to fill gaps in National Insurance records, and help people to qualify for some contributory benefits including state pension,’ writes the DWP.
The full new state pension is £164.35 per week – or around £8,500 a year – however, the actual amount you get depends on an individual’s National Insurance record.
National Insurance credits aim to ensure that someone’s state pension is not affected if they are unable to work and pay National Insurance contributions.
People who are in receipt of Child Venefit (even if they don’t receive any payment), Carer’s Allowance, Universal Credit, Jobseeker’s Allowance or Employment and Support Allowance and some other income replacement benefits receive National Insurance credits automatically.
People in the following circumstances may be eligible to apply for NI credits:
• Looking after a relative under age 12
• Foster carers
• On maternity, paternity or adoption pay.
• A partner of a person in the armed forces who is serving outside the UK.
• Caring for someone who is elderly, unwell or disabled for more than 20 hours a week.
• Looking for work and not claiming Jobseekers Allowance.
• Ill or disabled and not claiming Employment and Support Allowance. Some people on Statutory Sick Pay are also eligible for credits.
• On a training course.
• On jury service.
Some parents may not be aware that they need to make a child benefit claim to receive the credits and some may not claim because they feel they may be subject to the High Income Child Benefit Charge. However, parents can choose to receive no payments once they’ve applied and that charge won’t apply.
The Government has more information on National Insurance credit eligibility here.
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