Analysts are warning of the unintended consequences of Britons’ state pension payments if they chose to opt out of a vital benefit payment for parents.
The latest figures from HM Revenue and Customs (HMRC) show 7.62 million families claimed Child Benefit in August 2024, marking a decrease of 30,000 compared to the previous year.
Data released in the latest annual Child Benefit Statistics shows 712,000 families opted out of receiving payments whilst still claiming the benefit.
This represents a four per cent decrease in opt-outs compared to August 2023, potentially due to recent changes in the thresholds for the High-Income Child Benefit Charge (HICBC).
Analysts are warning of the state pension consequences for parents who do not apply for Child Benefit
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Since 2013, the introduction of the High-Income Child Benefit Charge has led to a steady decline in the number of families claiming Child Benefit.
The charge initially required parents earning over £50,000 to repay a portion of their benefit, with those earning £60,000 or more having to repay it entirely through self-assessment.
This financial disincentive prompted many families to stop claiming altogether, creating an unintended consequence for parents’ future state pension entitlements.
Many parents were unaware that by not claiming Child Benefit, they would miss out on valuable National Insurance credit which go towards state pension entitlement.
HMRC is responsible for administering Child Benefit support
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The Government has adjusted the HICBC thresholds, with the charge beginning when a parent earns £60,000 rather than £50,000. The new system takes one per cent for every £200 earned over this amount, rather than the previous one per cent for every £100.
This means parents now earn more before they need to repay any Child Benefit, which may explain the four per cent reduction in families choosing to opt out.
Despite these changes, many parents remain unaware of the importance of claiming even if they do not receive payments.
Helen Morrissey, the head of Retirement Analysis at Hargreaves Lansdown, outlined the importance of parents applying for Child Benefit in order to pick up the necessary National Insurance credits.
She explained: “The number of families claiming Child Benefit has fallen as the High-Income Child Benefit Charge continues to bite and this has consequences for parent’s state pension.”
“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.
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Parents are being encouraged to apply for Child Benefit
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“The latest data shows over 700,000 families opted to do this and it is hugely positive that awareness of this option is growing.”
She added that while threshold increases are helpful, awareness remains crucial. “It’s vital that awareness continues to be raised of the importance of claiming Child Benefit for the sake of your state pension,” Morrissey emphasised.
Parents who opt out of receiving payments can still secure National Insurance credits towards their state pension by claiming Child Benefit.
The latest figures suggest more families are becoming aware of this option, with over 700,000 now taking this approach, analysts note.
