The number of families claiming child benefit has fallen for the ninth year in a row according to new figures published today by HMRC.
According to today’s statistics, the number of households receiving benefits has decreased to 7.09 million. Despite the fact that the numbers were expected to fluctuate from year to year due to changes in the birth rate and migration, the number had increased in each of the nine years prior to the implementation of the child benefit levy. The graph depicts the charge’s dramatic impact on the number of people filing claims.
The number of UK families claiming child benefit peaked at 7.92 million in January 2013, before the implementation of the ‘high-income child benefit charge.’
The reduction in claimant numbers means that mothers are now missing out on critical National Insurance credits that they could have received by claiming child benefit. Many families are unaware that they can claim NI credits without receiving child benefit if they do not wish to incur a high-income child benefit charge.
HMRC will only allow claims to be backdated for three months, even if families realise they have been missing out. This implies that women may be missing out on many years of NI credits that could be applied to their state pension, and it may be too late to correct the mistake according to LCP.
In the worst-case situation, a person might lose 9 per cent out of their state pension. At current rates, this equates to a £2,400 annual state pension shortfall or about £50,000 in lost pension over the length of a typical retirement.
LCP partner Steve Webb says: “These latest figures represent a ‘slow motion car crash’ when it comes to women’s state pensions. The creation of the ‘high-income child benefit charge’ in 2013 has led to a steep decline in the number of mothers claiming child benefit and in particular in the numbers benefiting from National Insurance credits for time at home with children. Without these credits, women could be losing thousands of pounds in retirement income.
“As a matter of urgency, HMRC should scrap its rules on backdating claims so that mothers who realise they have missed out can claim their missing NI credits. But there needs to be a fundamental rethink of the way parents at home with children get their state pension rights protected as the current system is clearly seriously broken”.
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