Features

Child-benefit pensions trap affects 200,000

A loophole meaning parents miss out on the full state pension because of changes to the child-benefit rules could hit more than 200,000 people, says HMRC.

933_MW_P21_Pensions_Bottom

506910340

A loophole meaning parents miss out on the full state pension because of changes to the child-benefit rules could hit more than 200,000 people, says HMRC far more than previously estimated. The technicality potentially affects couples where one partner commands a higher salary while the other doesn't earn enough to pay national insurance contributions (NICs), perhaps because they're staying at home to look after children.

Usually, the non-working partner would qualify for national insurance credits, helping to ensure their national insurance record is sufficient to qualify them for a full state pension. However, where the higher earner is the one claiming the child benefit, the credits are never paid to their spouse, as the scheme is administered throughthe child-benefit system.

With savers needing 35 years of NICs to qualify for a full state pension, the problem means many people will miss out in retirement.

And while couples havethe option of moving the child-benefit registration to the non-working partner to close the loophole, the change can only be backdated by three months. Affected families are missing out around £4,900 per family over the courseof a 20-year retirement, estimates pension provider Royal London. MPs onthe Treasury Select Committee have urged ministers to take action to protect couples caught out, and to change the rules so more people don't fall into the trap.

Recommended

How your pension can cut your inheritance tax bill
Pensions

How your pension can cut your inheritance tax bill

Your retirement savings can help you maximise the amount of money you leave to your family.
11 Oct 2021
What will inflation do to my savings? Am I 100% covered for my retirement?
Pensions

What will inflation do to my savings? Am I 100% covered for my retirement?

Stop wondering and start taking control of your finances with clear, concise, practical advice from the UK's most intelligent financial minds.
1 Oct 2021
Salary sacrifice: how to earn less and save more into your pension
Pensions

Salary sacrifice: how to earn less and save more into your pension

Changing the way that you save for retirement could help limit the damage of next year’s national insurance rise.
28 Sep 2021
Should you defer your pension and stay in work?
Pensions

Should you defer your pension and stay in work?

The pros and cons of deferring your pension and staying in employment beyond 66 are finely balanced.
15 Sep 2021

Most Popular

Why the world’s most important economic data release has unnerved markets
US Economy

Why the world’s most important economic data release has unnerved markets

The US added only 194,000 jobs in September, far shorter than the 500,000 that were expected. John Stepek explains why markets didn't react as they no…
11 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021
Inflation is still one of the biggest threats to your personal finances
Investment strategy

Inflation is still one of the biggest threats to your personal finances

Central bankers and economists insist inflation will be gone by next year. We're not so sure, says Merryn Somerset Webb. So if you haven’t started to …
1 Oct 2021