The number of mothers missing out on state pension rights has doubled.
According to new figures released by the HMRC, the recent rule changes on child benefit have had a detrimental impact on a growing number of mothers. Royal London data also reveals that collectively, hundreds of millions of pounds in retirement has been lost.
A policy paper was published by Royal London in November. Focussing on mothers from higher income families, it highlighted how they were giving up claiming for Child Benefit after the ‘High Income Child Benefit Tax Charge’. Introduced in January 2013, the change means that where one half of a couple earns over £60,000 annually, a tax charge would clear the value of any Child Benefit. As a result, the number of mothers claiming for Child Benefit dropped after the charge was brought in.
However, this can have more serious consequences in the longer term. Where a mother does not make a claim for Child Benefit, she misses out on National Insurance credits which go towards her state pension. Every 12-month period missed could cost 1/35 of the state pension value – around £231 per annum over a 20-year period.
Before the changes were brought in, the number of families receiving Child Benefit has grown each year since 2007. Since 2013, however, the figures have fallen.
HMRC state that the proportion of children receiving Child Benefit is at its lowest level since the figures started being recorded in 2003.
In terms of the number of mothers missing out on National Insurance credits – crucial for their state pension – Royal London estimates that the figure has more than doubled over the last two years. It now stands in the region of 50,000.
Commenting on the findings was Steve Webb. The Director of Policy at Royal London stated: “Tens of thousands of mothers with young children are missing out on vital state pension rights. 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”.
