The introduction of a plan to protect the National Insurance accounts of people, especially mothers, who may lose out when it comes to the state pension has been delayed, the government announced today (March 30).
The delay has been criticized as “very disappointing” by Steve Webb, a former pensions minister and now a partner at pensions consultancy LCP.
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However this created a new problem – not claiming Child Benefit also meant not getting the important ‘National Insurance credit’ for anyone with a child under 12. These credits help protect the government’s records of the pension of those who are raising children.
Who will be affected by the delay in the replacement credits system?
Those who will not reach state pension age until after April 2027 should not be affected – as long as they had not deliberately paid voluntary National Insurance contributions for the ‘missing’ years.
But, Webb pointed out, the delay will be particularly frustrating for those who have reached state pension age or will do so soon, and may receive less state pension than they should. In response, HMRC said that people who have lost out, in relation to a reduced state pension, may be able to claim financial assistance.
The LCP’s Webb said: “It’s very disappointing to see the delay in a scheme designed to remove clutter from the pension system. When the High Child Benefit Tax was introduced in 2013, some parents – particularly mothers – decided it wasn’t worth the trouble to claim Child Benefit, just so they or a partner could get the same payment as the child. It has thrown out important National Insurance points that lead to to the state pension.
“The government promised a few years ago that it would fix this problem by creating ‘new loans’, but now we hear – a few weeks before the new system is about to be introduced – it has been delayed by a year. The whole thing has been a mess from the start.”
An HMRC spokesman said MoneyWeek: “We can assure parents and guardians that when the service starts in April 2027, they will still be able to claim credits from January 2013, which means that no one will miss them.
“Because those who will benefit from the service will be families with children under the age of 12 from 2013, we expect that very few will have reached the state pension age this April.”
What are the current High Child Benefit Payment rules?
From 2024/25, if you or your partner earn more than £60,000 a year, you will be affected by the Higher Child Benefit Charge. You will pay 1% of Child Benefit for every £200 you earn over the limit.
This means that if you or your partner earn £80,000 or more, you will pay all Child Benefit through tax. Affected parents can opt out of paying Child Benefit. This means you are still registered for Child Benefit but not paid – allowing you to avoid paying tax but still getting National Insurance credit.
In the past, if you or your partner earned more than £50,000 a year, you would have to pay some Child Benefit. It can be fully tax-deductible if your or your partner’s income was £60,000 or more.
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