Delay to National Insurance credit system for mothers ‘deeply frustrating’

Today’s Government announcement of a delay in a scheme to protect the state pension records of mothers has been condemned as ‘deeply frustrating’ by LCP partner Steve Webb.

The issue relates to the impact of the introduction of the High Income Child Benefit Charge in 2013. For some parents – mostly mothers – it was still possible to claim Child Benefit but if they or a partner was on a high income they could face a tax bill which wiped out the value of the Child Benefit. In response hundreds of thousands of parents responded by simply not claiming Child Benefit.

The problem with not claiming Child Benefit is that this also means not getting a valuable ‘National Insurance credit’ for anyone with a child under 12. These credits help to protect the state pension record of those who are at home raising children.

An additional problem was that although parents who subsequently identified the problem could make a Child Benefit claim (and simply ask for the NI credits and not the cash benefit), such claims could only be backdated for 3 months. This meant that they could still have years missing on their NI record.

In response to this, the Government promised to create a system where parents in this position could be awarded ‘replacement credits’. This system was due to come into force with effect from 2026/27.

But the Government has today announced a delay of one year in the introduction of this scheme.

This should not affect those who will not reach state pension age until after this point (provided they had not inadvertently paid voluntary NICs for these years), but will be especially frustrating for those who have already reached pension age or will do so shortly. In response, HMRC has said people who have lost out (in terms of reduced state pension) may be able to claim assistance.

Commenting, Steve Webb, partner at LCP said: “It is deeply frustrating to see a delay in a scheme designed to unpick a mess in the pension system. When the High Income Child Benefit Charge was introduced in 2013, some parents – mostly mothers – decided it wasn’t worth bothering to claim Child Benefit, only for them or a partner to get a tax bill for the same amount. But by not claiming Child Benefit they also threw away valuable National Insurance credits towards the state pension. The Government promised several years ago to fix this problem by creating ‘replacement credits’, but now we hear – just a few weeks before the new system was about to be introduced – that it has been delayed by a year. The whole thing has been a mess from the start”.