Why must parents wait three years for state pension credit fix, ask MPs

State pension credits: Many parents assumed they should not make a child benefit claim if they do not qualify to receive the money

MPs have questioned a three-year delay to fixing state pension holes for parents and asked for more details of ‘simplification’ plans to help them claim valuable credits.

After shunning their pleas for years, the Government revealed last spring that parents who made innocent child benefit errors would be able to repair state pension records.

Last month it announced claims would be allowed from April 2026.

But the wait was challenged by MPs on the Treasury Committee, who also asked if eligible parents will be actively identified and encouraged to come forward.

‘If not, why not? Will there be an advertising campaign to encourage those who may have missed out to claim, and if so, has a budget been set aside to allow this to occur?’ said chair Harriet Baldwin in a recent letter to HMRC.

HMRC replied it had prioritised announcing policy detail in advance of implementation to ‘provide certainty as soon as possible to affected individuals’.

It added that while it could not identify those eligible, it would promote the change on Gov.uk and social media channels, and via parenting groups and media commentators.

Former Pensions Minister Steve Webb says the plans feel like a ‘sticking plaster’ solution but are ‘better than doing nothing’. He has called for parents’ state pension credits to be linked to birth registration – find out more below.

Mums denied state pension credits WILL get them

This is Money campaigned for five years for fair treatment for parents – mostly mums – who do not qualify for child benefit yet stood to lose tens of thousands of pounds in old age if they did not claim it anyway.

Each one-year credit missed could cost you 1/35 of the value of the state pension – at today’s rate around £300 per year or more than £6,000 over the course of a typical 20-year retirement.

By the time of last year’s climbdown by the Government, some parents who unwittingly had a 10-year gap in their National Insurance record stood to lose £60,000 during retirement, if they didn’t close it some other way.

Many new mums and dads told us they had no idea an innocent misunderstanding of obscure child benefit rules could dramatically affect how much state pension they might receive decades from now.

They had assumed they should not make a child benefit claim if they did not qualify to receive the money.

The Government now says its fix will cover all parents affected, going back to the overhaul of child benefit in 2013, after finally abandoning its defence of current state pension rules.

It previously insisted parents must claim child benefit, whether they qualified to receive payments or not, within three months of having a baby to ensure they got all state pension credits they were due.

Child benefit is reduced for those earning £50,000-plus a year, or wiped out entirely for those earning £60,000-plus.

Parents can submit a claim for child benefit but tick a box to opt out of receiving payments, and only get state pension credits – anyone who has not done so yet is urged to by HMRC.

This is Money’s pension columnist Steve Webb, who is also a partner at LCP, launched a high profile petition in 2018 demanding full backdating of mums’ pension credits, instead of just three months.

But the Government rejected his call, arguing it was too hard to verify child benefit claims older than three months.

Webb says today: ‘It does feel like a ‘sticking plaster’ solution to create yet another NI credit to pick up people who didn’t get the first NI credit because they were put off claiming child benefit.

‘It’s better than doing nothing, but it’s not a great place to end up.

‘The challenge will indeed be take-up – given that there is already a route to getting the credit (claim child benefit but then tick ‘credits only’ on the form) which isn’t working, can we be sure that the right people will now claim the new credit?’

Webb says ideally we need to tackle the problem at source, and if the Government is not going to abolish the high income charge the best answer is to break the link between the child benefit claim and the credit.

‘For me, the obvious thing to do would be to link the credit to birth registration. Although it’s not perfect (some people register a birth but aren’t eligible for benefits), it’s a lot more systematic.

‘So in my view, the new credit could be useful if it can be claimed retrospectively to fix the past problem, but ideally we don’t rely on this approach going forward.’

Jon Greer, head of retirement policy at financial services firm Quilter, says MPs have chastised HMRC for the length of time it is taking to implement the new rules and whether they actually simplify the system or make it more complex.

‘This issue is becoming more and more relevant given frozen thresholds for both income tax and the High Income Child Benefit Charge and high wage growth due to inflation.

‘The HICBC should be levied at around £65,000 now if it had gone up with inflation and according to the Office for Budget Responsibility there will be 2.1million more higher rate taxpayers and 350,000 additional-rate taxpayers in five years’ time.

‘Many of these taxpayers who are also parents, might not have claimed child benefit, mistakenly believing it would not benefit them or they’d need to go through the much maligned process of filing out a self-assessment form.’

Greer says the Treasury Committee’s concerns over HMRC’s approach to rectifying this issue show that questions linger about the the three-year delay and the initiative’s effectiveness and reach.

‘The reliance on basic communication channels, such as parenting groups, may not suffice. This is especially true for parents whose children are older than 16 and are no longer engaged with these groups.

‘The committee also questioned the initiative’s labelling as a ‘simplification’, arguing that it adds complexity to an already convoluted tax system, potentially burdening individuals and HMRC alike.’

What do MPs say, and what are HMRC’s plans?

Harriett Baldwin MP, chair of the Treasury Committee, posed the following questions to HMRC about plans to legislate to allow parents and carers to apply for NI credits if they have not claimed child benefit (read her full letter here).

– Why was this policy announced as a ‘simplification’, given that it seems to require further contact with the tax system?

– The announcement states that those affected will be able to claim from April 2026. This work was first announced in April 2023. Why will it have taken three years to implement? Did you advise HM Treasury that you would be unable to commence a system any earlier?

– Will HMRC actively identify those who may be eligible to claim, and proactively encourage them to do so? If not, why not?

– Will there be an advertising campaign to encourage those who may have missed out to claim, and if so, has a budget been set aside to allow this to occur?

Jim Harra, chief executive of HMRC, made the following points in his response (read his letter in full here).

– The Written Ministerial Statement reiterated the four principles of simplification, one of which is that ‘tax policy should not unnecessarily distort the decisions of taxpayers and result in poorly informed choices’.

Child benefit claim rates have reduced in the last decade, meaning individuals may have unintentionally missed out on the NI credit associated with claiming child benefit. This measure provides a route for parents who have missed out on their state pension entitlement to fill gaps in their NI records.

The measure will be delivered through HMRC Online and App services to ensure a good customer journey, minimising the number of times individuals need to interact with HMRC.

– The Government wants to provide certainty as soon as possible to affected individuals that they will be able to claim the NI credit and fill gaps in their state pension, so has prioritised announcing policy detail in advance of implementation.

Implementation of the credit will depend on both passing legislation and IT system development, and our work undertaken so far on IT development suggests April 2026 is the earliest viable delivery date.

Individuals will be able to claim the NI credit for prior periods dating back to 2013, meaning they should not be disadvantaged by this implementation timeline.

– HMRC continues to advise customers who are eligible to claim child benefit as this remains the primary route for accessing the credit.

In relation to communications with eligible customers, HMRC cannot identify individuals who may have been eligible for child benefit but did not claim. This is because, without a child benefit claim, we cannot establish who is responsible for a child and hence who may be eligible for child benefit.

However, HMRC and DWP will promote the NI credit via relevant channels, including using existing child benefit communications on GOV.UK, social media channels and through third party parenting groups. HMRC and DWP will also engage with media commentators and all other relevant groups.

What else does HMRC say?

An HMRC spokesperson says: ‘This change means parents will be able to claim important National Insurance credits going back to 2013 if they have not previously claimed child benefit. 

‘We are developing comprehensive plans to raise awareness of the change and to ensure parents don’t miss out on their state pension entitlement.’ 

HMRC adds that April 2026 is the earliest possible implementation date for the measure, which will require both legislative and IT changes. Affected parents will then be able to retrospectively apply for the NI credits online. 

This post first appeared on Dailymail.co.uk