Stay-at-home parents risk missing out on full state pension, MPs warn

High-earning families who don´t register for Child Benefit could end up with a smaller state pension, the Treasury Committee has warned.

Since 2013, Child Benefit is no longer paid to families with a high earner. For couples where one partner earns between £50,000 and £60,000, a progressively rising tax charge is incurred, and at incomes over £60,000, the tax charge wipes out the value of the Child Benefit entirely.

As a result, some families may not bother to register for the benefit. However, registering builds up entitlement to the state pension for parents of children under 12 who do not pay National Insurance contributions (e.g. because they decide to stay at home to look after their children). If the parent doesn´t register for Child Benefit, they may forgo their entitlement to National Insurance Credits, and therefore part of their future state pension.

As the Treasury Committee explained, when the tax charge was introduced HMRC wrote to affected households asking if they wished to opt out of receiving the benefit. Those who opt out continue to get the National Insurance Credit required for the full state pension. However, parents who have started a family since January 2013 may have seen no advantage in registering for Child Benefit due to the tax charge. These families — for instance, consisting of a higher earner and one stay-at-home parent — could be missing out on the National Insurance Credits required for a full state pension.

Nicky Morgan, chair of the Treasury Committee, expressed concern over recent figures showing a limited number of opt-outs of new Child Benefit claimants, suggesting that many haven´t registered, and an increase in the proportion of male Child Benefit claimants.

“A shift in Child Benefit applications from mothers to fathers, where there is no underlying change in household formation, who earns or childcare responsibilities, represents a potential future pension problem,” she explained.

“There is a risk — to any household with one person earning and one person not earning but undertaking childcare commitments — that if the sole earner claims Child Benefit, the non-earner, with childcare commitments, forgoes National Insurance credits and, therefore, their entitlement to a full future state pension.”