LITRG welcomes government move to fix state pension ‘trap’ faced by some parents and guardians

The Low Incomes Tax Reform Group (LITRG) welcomes the government’s confirmation today that it intends to address an issue faced by some parents and guardians who have not claimed Child Benefit and may have missed out on future entitlement to a full state pension as a result.¹ However, LITRG urges the government to ensure that those who may become eligible for backdated National Insurance (NI) credits are refunded any voluntary NI contributions made for relevant years. 

Child Benefit claimants are automatically entitled to NI credits for children up to the age of 12. However, some families may have decided not to claim Child Benefit at all. This can often be driven by a desire to avoid having to pay the High Income Child Benefit Charge.² Unfortunately this can leave a non-working or lower-paid parent out of pocket later down the line, as a lack of Child Benefit claim could lead to gaps in the their NI record and potentially a reduced State Pension later in life.³ 

Antonia Stokes, Technical Officer at LITRG said: 

“We are pleased that the government is looking to address this issue, as it is something that LITRG has called for on several occasions.⁴ However, at this stage, all we have is a concept – there is little meat on the bones. We therefore urge the government to make sure it considers some potential complications as part of its work in this area.

“A particular concern is how the retrospective award of NI credits will affect those who may have already made voluntary NI contributions to cover the affected years.⁵ We would urge the government to repay people who might have already made voluntary contributions of many hundreds of pounds to ensure their entitlement to state pension is protected. If they do not, these people may be left financially disadvantaged compared to someone who did nothing at all.

“Another important consideration will be the timeframe for claiming retrospective NI credits. We think this should be as long as possible – or otherwise without time-limit. Our experience suggests that some people do not realise that they have gaps in their NI record until they actually come to claim state pension. For maximum benefit, the government should ensure that people are not time-barred from benefiting from any retrospective credits.”