Child benefit NI loophole ‘disrupts state pension rights’

More than 200,000 households may be missing out on a full state pension because of changes to child benefit, a parliamentary committee has been told.

Of the 7.9 million households in the UK receiving child benefit, around 3% – over 200,000 – may not be benefiting from national insurance credits because the child benefit is claimed by the higher earner in the household, according to HMRC figures presented to the treasury committee.

Registering for child benefit builds up state pension entitlement for parents of children under 12 who do not already pay NI contributions, for example if they stay at home to look after children.

But if the higher earner in the household claims benefits then the other parent may forgo their National Insurance credits and therefore part of their future state pension, according to HMRC.

Treasury committee chair Nicky Morgan called on the government to address this issue and “put it right”.

She said: “The treasury committee has long warned the government of the risk that for families with one earner and one non-earner, that if the sole-earner claims child benefit, the non-earner, with childcare commitments, forgoes national insurance credits and, potentially therefore, their entitlement to a full future state pension.

“New figures today from HMRC show that over 200,000 parents may be in this situation, and therefore missing out on their pension.”

A government spokesperson said: “We want people to get the state pension they are entitled to, and have made it easier for national insurance credits to be transferred between parents, so that no one loses out.”