£23k pension blow to middle-class mothers

MPS have issued a stark warning that thousands of middle-class stay-at-home mothers are on course to lose tens of thousands from their state pensions because they did not register for child benefit.

After means-testing of the once-universal benefit began in 2013, many women with high-salary partners saw no point in signing up because it was no longer paid if either parent earned more than £60,000.

But registering for child benefit, even if none was payable, was the key step that allowed mothers who did not work to keep building up a full state pension.

And according to pensions provider Royal London, more than 50,000 mothers are affected and some will lose more than £23,000 of entitlements. Current rules do not allow them to make backdated claims for missing credits.

Treasury committee chairman Nicky Morgan said it had foreseen this ‘preventable’ problem seven years ago and urged the tax authorities to act then.

HM Revenue & Customs promised an awareness campaign but Miss Morgan said its own figures showed that it had failed.

Last month Royal London warned that the problem has set back pensions equality between men and women by a decade.

A parent who does not either work, claim the benefit or actively opt out of receiving it loses their entitlement to National Insurance Credits. Without these, they lose part of their future state pension.

When child benefit means-testing began, families with children were asked if they wished to opt out and those who did so continued to get credits towards a full pension. However, many better-off couples who started families after January 2013 saw no need to register. Some feared being pushed into a higher-rate tax bracket.

Latest figures show that the number of families receiving child benefit is 7.38million, compared with 7.92million in 2012.

In a blunt letter to Mel Stride, Financial Secretary to the Treasury and Paymaster General, Miss Morgan said: ‘This problem was wholly foreseeable and preventable.’

An HMRC spokesman said: ‘We urge everyone to claim child benefit to help protect their future right to the state pension. It is hugely important that they do this.

‘If anyone is worried about their National Insurance record, they can contact HMRC at any time check how many years of credits and contributions they have built up.’