We’ve been caught by the Child Benefit state pension entice – ought to we purchase extra years? STEVE WEBB replies

My wife and I have been caught by the Child Benefit state pension trap you’ve written about before.

In essence, we never claimed Child Benefit (as we understood it would be tapered away) and didn’t realise the impact this would have on National Insurance contributions. 

As a result, there were several years between 2013 and now when my wife wasn’t working and was a full-time carer, leaving gaps in her NI record.

In your article, you mentioned the Government is planning to allow families to repair their NI records from April 2026. At the same time, I’m aware there is a deadline to top up historic NI contributions, which ends in April 2025.

My question is: should we pay to top up my wife’s historic contributions now (before April 2025) and then hopefully be able to reclaim those top-ups in 2026? 

Or should we wait and rely on the government’s proposed repair process, avoiding the need to pay upfront? Clearly, the risk with the second approach is that the ‘repair’ process might not materialise.

I’d be grateful for any insight or advice you can provide. I imagine this question might also be relevant to other readers in a similar situation.

SCROLL DOWN TO FIND OUT HOW TO ASK STEVE YOUR PENSION QUESTION

Tax trap: We never claimed Child Benefit and didn’t realise the impact this would have on National Insurance contributions

Steve Webb replies: One of the most valuable features of the National Insurance system is that it provides ‘credits’ to certain groups who have not actually paid NI contributions in a given year. 

These credits help to protect the NI record of those who are not in paid work because of caring responsibilities or who are claiming benefits because they are unable to work due to ill health etc.

Until the High Income Child Benefit Charge was introduced in 2013, take-up of Child Benefit was close to 100 per cent and anyone on Child Benefit with a child under 12 (or under 16 prior to 2010) automatically protection on their NI record towards their state pension.

But once higher income families faced a tax charge which could wipe out some or all of the value of the Child Benefit, hundreds of thousands of people – such as you and your wife – decided not to claim Child Benefit.

Unfortunately, this meant that you also lost the associated National Insurance credit. And even if you put in a claim for Child Benefit now, this would only be backdated for three months, leaving your wife with several years of gaps in her NI record.

The original ‘workaround’ introduced by the government was that people would be allowed to claim Child Benefit NI credits but not the benefit itself. 

This meant obtaining a Child Benefit claim form and filling it in, but ticking a box to say that you didn’t actually want the money, just the credits on your NI record.

Not surprisingly, many people were unaware of this system and it never occurred to them that they should fill in a benefit claim form but ask not to be given the money.

Belatedly, the previous government realised that many mothers (in particular) were at risk of reduced state pensions because of multi-year gaps in their NI record during periods when Child Benefit was not claimed.

Got a question for Steve Webb? Scroll down to find out how to contact him

The solution proposed was a new category of NI credit for those who would have got NI credits if they had claimed Child Benefit (since 2013) but did not do so because of the High Income Charge. 

However, although the intention to introduce this new system was announced, no legislation has so far been implemented or even published.

My assumption is that the new government is likely to carry through the policy announced by their predecessors. 

You would imagine that a Labour government would be concerned about the ‘gender pension gap’ and would want to take steps to avoid a new state pension gap arising because of the Child Benefit issue.

However, I am not aware that this policy has been formally confirmed by the new Government.

As you say, the ability to pay historic voluntary contributions (going back more than six years) runs out on 5th April next year so if the Child Benefit fix were to be dropped you would want to know sooner rather than later. 

I do, however, think it would be risky to make voluntary payments in the hope of being reimbursed if or when the new credits are introduced.

The best thing that I can suggest is that you (and other readers) ask your local MP to write to the Treasury (who oversee HMRC and the National Insurance system) and ask for written assurances that the new credits will be introduced. 

The more letters from MPs that a Government department receives, the more likely are Ministers to take note of an issue and give it the priority that it deserves.