The chair of the Treasury Select Committee has called on the government to act after an HM Revenue and Customs analysis found more than 200,000 parents could be missing out on a state pension if they are not in work.
Nicky Morgan asked the tax and benefits agency to examine whether there were parents who were losing out on building up a pension entitlement due to childcare commitments.
Pensions rules mean if one parent is in work and the other is not, the parent who is undertaking childcare can still build up entitlement for the state pension – usually accrued with records of national insurance payments – if they receive child benefit payments for children under the age of 12.
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However, if the working parent also receives the payment, then there is a risk that the parent who is caring for children misses out on a pension entitlement.
Asked to review how many people may be affected, HMRC said that its own data does not contain information on the identity of both parents, only the child benefit claimant.
However, using the Department for Work and Pensions’ family resources survey as a snapshot of households, HMRC has estimated that around 3% of the 7.9 million UK households claiming child benefit may include one parent in this position – around 237,000.
In a letter to the committee, HMRC highlighted that this only arises where there is a child under 12 and the actual claimant’s partner is earning below the lower earnings limit and is not receiving NI credits from another source.
This also does necessarily not mean that these individuals will miss out on a state pension, as they may build up sufficient credits throughout their working life (which usually requires 35 years of employment).
But Morgan said government must do more to make parents aware of the possible problem.
“The Treasury committee has long warned the government of the risk that for families with one earner and one non-earner, that if the sole-earner claims child benefit, the non-earner, with childcare commitments, forgoes national insurance credits and, potentially therefore, their entitlement to a full future state pension.
“Now we have an idea of the scale of this problem, the government needs to pull its finger out and make sure people are aware of the issue and know how to put it right.”