Royal London published a policy paper entitled ‘Mothers Missing out on Millions’ which highlighted the way in which mothers in higher-income families were giving up claiming child benefit. This was because of the introduction in January 2013 of the ‘High Income Child Benefit Tax Charge’. This rule means that couples, where one partner earns more than £60,000 per year, have the value of their Child Benefit wiped out by a tax charge. In response to this, growing numbers of mothers starting a family since January 2013 have declined to claim Child Benefit at all. But this means they are missing out on vital National Insurance credits towards their state pension. Each year missed could cost 1/35 of the value of the state pension of around £231 per year or over £4,600 over the course of a typical 20-year retirement.
Based on the new report, Royal London estimates that the number of mothers missing out on vital credits towards their state pension has more than doubled in the last two years and now stands at around 50,000.
A woman who started her family in early 2013 and decided not to claim Child Benefit could have missed out on state pension credits for five years so far. The total loss over those five years could be 5/35 of a state pension. This is over £1,000 per year in retirement. Over the course of a twenty-year retirement, such women could be more than £20,000 worse off in total. Worse still, as things stand, Child Benefit claims can only be backdated for three months so they will never recover the lost pension rights.
It is never too soon to start planning for your retirement. Contact us today to arrange a free initial meeting with one of our financial advisers. Meeting can be held at a time and location convenient to you. We have offices in Kettering, Stamford and London. We also make use of meeting rooms in Lincolnshire, Northamptonshire, Warwickshire and Bedfordshire.