
DWP state pension warning to parents as they could 'unintentionally' lose money
The warning comes from Hargreaves Lansdown as new data from HMRC revealed that 30,000 fewer families are claiming the extra monthly payments
Parents have been issued a warning about opting out of claiming Child Benefit as it could have a major impact on their state pension.
The warning comes from Hargreaves Lansdown as new data from HMRC revealed that 30,000 fewer families are claiming the extra monthly payments. According to the data, as of August 2024, 7.62 million families were claiming Child Benefit, which is 30,000 less than the year before in August 2023.
The data revealed that 712,000 families chose to opt out of receiving payments. According to Hargreaves Lansdown, this is a decrease of 4% from the previous year and could be due to the raised High Income Child Benefit Charge (HICBC) thresholds.
Since the introduction of the charge in 2013, the number of families claiming child benefit has been steadily decreasing. Under Child Benefit rules, you pay money back to HMRC at a rate of 1% for every £200 you earn over £60,000.
If you earn over £80,000 and you'll need to pay back 100% of it - meaning you don't get anything. To pay back the benefit, you currently need to submit a self-assessment tax return. However, this is set to change this summer.
If you don't want to pay the charge, you can opt out of Child Benefit payments by contacting the tax office. However, Hargreaves Lansdown has warned that this could mean parents miss out on National Insurance credits that go towards their State Pension.
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown: said: 'It's an undeniable fact that fewer families have claimed Child Benefit since the charge was introduced back in 2013. Faced with the prospect of having to effectively repay a portion, or even all of the benefit, it's no wonder many parents decided not to bother claiming at all.
"However, the law of unintended consequences loomed large here, as many didn't realise that by opting out, they were missing out on vital National Insurance credits that could be used towards their state pension."
Under the current state pension rules, you need 35 qualifying years on your National Insurance record - some people may need more - to claim the full new state pension. You normally need 10 years to receive anything at all.
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You build up your National Insurance record through working; however, if you are not working, or not earning enough to pay National Insurance, you can claim National Insurance Credits, which help plug those years.
If you claim Child Benefit, you receive National Insurance Credits if you are not working or earning less than £123 a week. If you opt out of Child Benefit, and are not working for periods of time, then you will not receive these automatic top-ups. This could leave you unknowingly reducing your National Insurance record for the state pension - meaning you could lower your state pension payments.
Helen added: "Government did act, and parents were then able to sign up for the benefit and receive the National Insurance credit without actually receiving the money. The latest data shows over 700,000 families opted to do this and it is hugely positive that awareness of this option is growing.
"The thresholds for HICBC have also been raised which means that fewer families will have a liability. However, it's vital that awareness continues to be raised of the importance of claiming Child Benefit for the sake of your state pension.'
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