As a result of ‘administrative discrepancies’ by the Department of Work and Pensions (DWP), mothers may have been underpaid around £1bn in state pension. This has occurred due to information missing from the national insurance (NI) records. HMRC has outlined its plans to ensure that individuals will receive their entitlements.
State pensions – What’s available
Basic State Pension (bSP)
You must be born before 6 April 1953 if you are woman and born before 6 April 1951 as man to qualify for this pension (currently £156.20 a week).
To build up an entitlement for the bSP, an individual must accrue national insurance (NI) qualifying years combining:
- Years where NI was paid
- Years where NI was treated as paid (for example with NI credits)
- Years where voluntary Class 3 NI was paid (filling any historic gaps)
Generally, women must have 39 qualifying years and men 44. Without these, they will only get a proportion of the full bSP.
New State Pension (nSP)
You must be born on or after 6 April 1953 if you are a woman and born on or after 6 April 1951 as a man to qualify for this pension (currently at £203.85 a week).
A minimum of 10 years and a maximum of 35 years for both men and women is required to receive full payment. Somewhere between 10 and 35 years means your entitlement is proportionally divided. You may have built up the required number of qualifying years, but must continue paying NI until you reach state pension age.
We would advocate checking your individual state pension forecast and identifying how many qualifying years have accrued. Read our article on this here.
Home Responsibilities Protection (HRP)
Since 1978, the NI system has included credits for parents who took time out of employment to raise their children. Home responsibilities protection (HRP) applied between 6 April 1978 and 5 April 2010. This provided eligible individuals with credits in qualifying years, so time spent caring or raising children would not negatively affect their state pension entitlement.
HMRC and the DWP revealed that individuals who did not provide their NI number, when claiming child benefit before May 2000, may not have had their credit for qualifying years incremented by HRP. After May 2000, providing your NI number became mandatory for child benefit claims.
What will happen next…?
- The DWP has a duty to delete child benefit data after five years. Consequently, it’s not possible to identify individuals who may not have received the credit of qualifying years.
- Therefore, from Autumn 2023, HMRC will identify and write to those who may have been entitled to HRP and do not have this recorded on their NI history. If eligible, the individual can make a claim online and HMRC will update the relevant information.
- Once this has been done, the DWP can recalculate the state pension, advising any money they may be owed. They will communicate their discoveries to HMRC, so they can collect any additional tax that may be due.
Who might be affected?
Claimants of child benefit before May 2000 may not have had the correct qualifying years recorded and, as a result, may not be receiving their entitled bSP. This applies where no NI number was quoted at the time of making the claim.
It’s likely that women in their 60s and 70s may be affected more than others. Unfortunately, some of these individuals may be deceased; their families will be entitled to check their eligibility and claim for money owed.
If you would like to check your eligibility, Pension consultants Lane Clark & Peacock have a step-by-step guide for this purpose.
What can you do?
HMRC suggest that individuals have no need to act, as they will be contacted anyway. Those over state pension age will be contacted first.
In spite of their advice, this has the potential to be such a significant endeavour, that individuals may choose to pre-empt their communication. The government website indicates that completion of the CF411 form (either online or postal) should enable HMRC to identify the relevant people more efficiently.
As well as this, HMRC has said that qualifying years can be transferred if the partner received the child benefit and they do not require the additional years for their NI history.
The DWP estimates that about £1bn is owed, to about 210,000 people, of which 43,000 have died. That would equate to an average shortfall of about £5,000 each.
A spokesman for the government said:
‘Our priority is ensuring everyone receives the financial support to which they are entitled, and state pension underpayment rates, due to official error, remain low at 0.5% of expenditure. Where errors do occur, we are committed to fixing them as quickly as possible.’
If you think this might affect you, either keep an eye out for correspondence from HMRC, or fill out the CF411 form. If you have any questions with regard to this, please get in touch with us, so we can assist you.
Make sure you’re not missing out.