Mums like me are losing frightening sums in state pension - I hope the Government does the right thing and lets us fix child benefit errors

Emma Maslin: 'We weren’t eligible for child benefit so we didn’t sign up for it. Why would you?'

Emma Maslin: 'We weren’t eligible for child benefit so we didn’t sign up for it. Why would you?'

This is Money is campaigning against the unfairness of parents ending up with a smaller state pension because they failed to fill in a child benefit form.

Mum Emma Maslin, a former corporate financier who writes personal finance blog The Money Whisperer, is among those who stand to lose tens of thousands of pounds in old age.

Emma explains below why the Government should allow her to correct this innocent mistake, and ways to improve the system to stop rising numbers of parents falling into the same trap.

As a woman who previously held a senior position in a Big Four accountancy firm, the choice I made to step away from my career to raise my young children means I am no longer earning on a par with my peers, male and female, who continued on the career ladder.

I am fine with that.

But I have suffered another frustrating, and significant, financial disadvantage as a result of my choice to step out of the workforce for a while. One which isn’t talked about enough and yet is affecting thousands.

Some parents – and it is dads too, but particularly mums – are finding themselves at risk of losing thousands of pounds of retirement income because of an administrative bungle around the claiming of child benefit.

In my case, it’s close to £20,000 assuming I live to my late 80s. With financial advisers urging women they need to plan to live to 100, my loss in that case will be significantly higher.

In a time where shared parental leave is now encouraged, women are still predominantly the ones who take time out to care for a baby, and in many cases, in to the children’s early years. In my case, I didn’t return to work until my eldest was four years old.

Any person who cares for a child under 12 who isn’t in employment, and therefore isn’t receiving national insurance contributions, is eligible for national insurance credits. 

But many simply aren’t getting them. Me included.  

Why?

Like me, many haven’t applied for them because they don’t know they are available to them. Worse still, once they do realise they are available, a claim can only be back-dated by three months.

We weren’t eligible for child benefit so we didn’t sign up for it. Why would you if you aren’t eligible to receive it?

In my case, by the time I discovered my error and put my claim in, I was already back at work and therefore my three months of back-dated credits were of no value as I was paying national insurance contributions anyway through my employment.

A better way of managing the application process is needed so that everyone who is entitled to credits receives them in full. At the moment, to receive these national insurance credits, you need to be registered for child benefit.

The issue is that child benefit is a means tested benefit; those earning over £50,000 get a reduced benefit and over £60,000 get none at all.

Large sums lost: Anyone who had a child in early 2013 when the rules changed and hasn’t applied for child benefit would currently be almost £30,000 worse off during retirement

Large sums lost: Anyone who had a child in early 2013 when the rules changed and hasn’t applied for child benefit would currently be almost £30,000 worse off during retirement

In our case, we weren’t eligible for child benefit so we didn’t sign up for it. Why would you if you aren’t eligible to receive it?! It sounded like a faff to receive it and then pay it back through our tax returns – far easier to opt out totally.

You can choose to sign up but not receive child benefit payments, and therefore get the credits towards the state pension without the faff, but I didn't know that at the time.

In opting out, I forfeited my national insurance credits. ‘National insurance credit’ doesn’t sound very glamorous. Most people don’t really understand the concept.

It’s only when you put it in to the context of how much money you stand to lose from your state pension that it makes your jaw drop.

You need 35 years of national insurance contributions or credits to receive the full state pension. For every year you miss a credit, this translates to almost £5,000 less you receive over a 20-year retirement.

Anyone who had a child in early 2013 when the rules changed and hasn’t applied would currently be almost £30,000 worse off during retirement than if they had applied in 2013. That is a frightening figure.

Change the form to be a registration for national insurance credits (which are available to all), with an opt in for child benefit (which is not available to everyone).

For all high-income families who are not in receipt of child benefit, I would love to see the government contact them to make them aware of the rules around state pension credits and give information on how to apply.

There does need to be a change in the registration process to stop disadvantaging certain demographics. 

I would like to see the form changed to be a registration for national insurance credits (which are available to all), with an opt in for child benefit (which is not available to everyone).

Change needed: Application for national insurance credits could be linked directly to the registration of a child’s birth

Change needed: Application for national insurance credits could be linked directly to the registration of a child’s birth

Better still, decouple national insurance credits from child benefit registration completely. Application for national insurance credits could be linked directly to the registration of a child’s birth.

The Government has managed to work from birth registrations in the past when it administered the setting up of Child Trust Funds to all children born in the UK. It’s feasible.

Achieving 35 years of national insurance contributions and/or credits to receive the state pension is a substantial milestone.

For those parents who take extended time out of paid work while their children are little, these credits are often vital to meet that target.

I hope the Government will do the right thing and back-date claims for those people who are eligible but did not complete the application at the time. After all, the money was allocated in the budget in the first place.

Why we are campaigning to help parents who lost out on pensions

Child benefit and state pension - It’s not the most obvious link. 

Unfortunately, some mums or dads who stopped work to look after children are now finding they’ve missed building up their state pension.

It should be easy to fix, but HMRC and the government have been stalling parents affected. That’s why This is Money has started a campaign to get this child benefit mess fixed, before it gets any worse.

Listen to the podcast below to find out why we are campaigning. 

Press play to listen on the player above, or listen (and please subscribe and review us if you like the podcast) at Apple Podcasts, Acast, Audioboom and Spotify or visit our This is Money Podcast page.    

 

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