Child benefit reforms could have cost parents thousands in pension credits, says ex-minister

Former education secretary Nicky Morgan has said that child benefit changes may have caused thousands of parents to lose out on pension entitlements.

Ms Morgan, who is chairwoman of the Commons Treasury committee, has written to the Financial Secretary to the Treasury, Mel Stride, regarding her concerns.

The ex-Cabinet minister says the issue stems from 2010 when the government outlined plans to remove child benefit from households containing a higher earner.

Ms Morgan (pictured) said the move meant that for couples where one partner earned between £50,000 and £60,000, a progressively rising tax charge was imposed, and at incomes over £60,000, the levy wiped out the value of the child benefit entirely.

If a parent of a child under 12 who does not pay National Insurance contributions does not register for child benefit they may forgo their entitlement to National Insurance Credits, and therefore part of their future state pension, the MP said.

When the tax charge was brought in at the beginning of 2013, HMRC wrote to affected households asking if they wished to opt out of receiving child benefit, as those who chose this route would continue to get the National Insurance Credit required for the full state pension.

However, Ms Morgan is concerned that parents who have started a family since January 2013 may have seen no advantage in registering for child benefit due to the tax charge and could be missing out on the credits.

Ms Morgan said: “This problem was wholly foreseeable and preventable. Parents have not registered for child benefit for fear of the higher rate tax charge. They may be forgoing their National Insurance Credits, and therefore part of their future state pension.

“The Treasury committee warned that this may happen seven years ago. It urged the Government to provide parents with clear information about how their pension entitlement could be affected by the charge.

“HMRC stated that a clear communications strategy was being developed. It appears that this strategy has not been up to scratch, to the cost of thousands of parents.

“I have asked the Financial Secretary to provide the committee with details of the number of people affected, how HMRC is informing those who may have their pension entitlement affected, and whether HM Treasury has undertaken any analysis of the problem.”

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