The pension gap and the gender pay gap for women is a big issue, and one that isn’t going away! Research carried out by PensionBee highlights a pension gap across all areas of the UK. Based on a sample size of 5,098 pension pots in May 2018, there was an average pot for men of £23,416 and an average pot for women of £16,083. A 31% difference which can, at least in part, be attributed to the gender pay gap and the time women take off work having children.
Even more worrying is that the gap widens later in life; the pot size for men aged 50 plus is £53,449 compared to just £31,254 for women of the same age. A huge 42% difference.For more information on this analysis read more here.
There’s another issue that could impact the State Pension for women
Figures supplied to @CommonsTreasury show that tens of thousands of child benefit recipients may be losing out on national insurance credits which will affect state pension entitlement https://t.co/EZoPK7MZKV— Nicky Morgan MP (@NickyMorgan01) January 24, 2019
Back in 2013 the government changed the claim rules around Child Benefit. I remember it clearly as it was the first time I appeared in the media sharing my views. I had just given birth to Jack, my third child, and was just about to lose the Child Benefit payment for my three children as I was earning more than £60k. We were featured in the Daily Telegraph talking about the impact of losing the benefit.
If one partner earns more than £60k per annum, then the Child Benefit payment is not due. Or if one partner earns between £50- 60k then the benefit is tiered at 1% for each £100 they receive between £50-60k. As a result many parents simply didn’t apply for Child Benefit as they knew it wasn’t due to be paid with the new income rules.
Mind the NI credit gap
Please sign this petition…mums are missing out on national insurance contributions due to opting out of child benefit. Petition: Make sure mothers get National Insurance credits towards their state pension https://t.co/7DMBeWD3Lv— Mrs Mummypenny (@MrsMummypennyUK) November 28, 2018
At the point of not claiming the benefit, an individual also gives up the right to National Insurance (NI) credits. NI is paid when you work, or you receive NI credits when you receive certain benefits. An individual needs 35 years of NI payments or credits to be able to claim the full State Pension in retirement.
There will be a significant population of women who didn’t apply for Child Benefit, thinking that they weren’t entitled to receive it and who didn’t return to work after having their child. They will now have a significant NI credit gap. Perhaps up to six years, since the rules changed.
Everyone needs to claim for Child Benefit, as this will ensure their NI credits are still received. Parents can then opt out of payments if the salary limits apply or can even continue to receive the payment but then pay it back via a tax charge. It’s really important to make that claim and keep your NI credits!
- Can I back date my claim?
Unfortunately, you can only backdate a Child Benefit claim for three months so if you read this and realise you have a gap in your NI record it cannot be rectified.You can check your NI record on the government website. There are many companies campaigning to change this time limit, and to backdate further, but at the moment the government is not moving on this rule.
- Take action now
If you’re currently not working and are a stay-at-home parent, do this small piece of admin and make a claim for Child Benefit to ensure that you receive your NI credits. And spread the word, share this article with people you know who might be in this situation.
The government provides some useful information on the topic:
Are you or your partner claiming Child Benefit? If one of you is working and paying National Insurance contributions, you can transfer the National Insurance credits attached to Child Benefit to protect the State Pension of the person who is not working. https://t.co/yTDzWeEpkt pic.twitter.com/7JCSTvGyFt— HM Revenue & Customs (@HMRCgovuk) February 8, 2019
All customers eligible for Child Benefit must claim it to protect their NI contributions record and get a National Insurance number for their child automatically when they reach 15 years and nine months.
Having made a claim for Child Benefit, customers liable to the High-Income Child Benefit Charge (HICBC) can then either elect to opt-out of receiving payments of Child Benefit or continue to receive Child Benefit payments and pay the tax charge.
For people with income between £50-60K, the tax charge is a proportion of the Child Benefit received; 1% for each additional £100 income. Where income is over £60K, the amount of the charge is equal to Child Benefit received.
Many individuals will not need these NI credits to maintain full eligibility for the State Pension. They may already be achieving qualifying years for the years in question through other means, for example, if they are working (and paying NI contributions) or receiving NI credits for another reason.
Also, under the design of the new State Pension, most people of parental age will get a full State Pension with 35 qualifying years (out of an approximate 50 year working life) when they reach State Pension age. Therefore, they may build up enough qualifying years for the full rate of the new State Pension, even if there are some gaps in their NI record.
Individuals can access a State Pension forecast on demand using theGovernment’s online Check your State Pension service. This includes details on how to increase entitlement either through NI credits or voluntary contributions.
A government spokesperson says: “To ensure no one misses out on their full State Pension entitlement, HMRC has always encouraged families to claim Child Benefit, including households who might have to pay the High-Income Child Benefit Charge. The Child Benefit claim form – which is included in Bounty Packs – stresses the importance of this. However, we are continuously considering ways in which communications can be improved further, both at the birth of a child and for existing Child Benefit claimants.”
Lynn Beattie is a PensionBee customer and CEO/Founder of Mrs Mummypenny, a personal finance website. She is also an ACMA management Accountant, previously working in commercial finance for Tesco, EE & HSBC. Lynn is a single mum to three boys, living in Hertfordshire, and is the author of ‘The Money Guide to Transform Your Life‘ published in September 2020.