ate: 14 March 2012
embargo: For immediate release
350,000 parents could lose state pension credits if child benefit is cut
Just over 350,000 parents, the majority of whom are likely to be women, could lose vital national insurance credits towards their state pension if child benefit is withdrawn for higher rate taxpayers, the TUC says today (Wednesday).
Recipients of child benefit currently receive credits towards their state pension if they are caring full-time and not in work. These credits, available until a child is 12, ensure that caring and parenting is fully recognised in the state pension system.
Economist Howard Reed has analysed official government statistics for the TUC and found that there are 351,000 families with children under 12 in which one person is earning over the higher rate tax threshold and the other is either not working (288,000 parents) or earning below the lower earnings limit (£102 per week) needed to receive national insurance contributions (63,000 parents).
These stay-at-home or low earner parents, whose partner pays higher rate tax, therefore risk losing their state pension credits along with their child benefit.
Historically, the failure to recognise full-time caring and parenting in the state pension contributed to a sharp gender pay divide in retirement, with millions of women not receiving a full state pension.
Recent changes, such as ensuring child benefit recipients receive credits and reducing the number of qualifying years needed for a full pension to 30, have helped close the gender gap in pensions.
Withdrawing child benefit would therefore be a step backwards and could mean many full-time parents and carers failing to get a full state pension, says the TUC.
It is possible to buy back up to six years worth of credits, but at £12.60 a week it could cost around £4,000 to buy them back.
A separate TUC analysis shows that of the 2.46 million families with a household income of more than £42,475 – the point at which higher rate tax is paid – nearly a million families (39 per cent) will keep their child benefit while another 1.5 million families will lose out.
The chances of keeping child benefit are based as much on the distribution of family income as on the amount of money earned, which is a poor basis for any tax or benefit, says the TUC.
The TUC believes that child benefit is an important recognition of the cost of raising children, as well as of the contribution that carers make to society, and should not be withdrawn.
There are far better ways to tax wealth than a policy that can lead to someone taking home less money if their pay moves above £42,475, penalises single parents and full-time carers in particular, and takes away someone’s state pension credits, says the TUC.
TUC General Secretary Brendan Barber said: ‘Child benefit recognises the cost of raising children and the contribution that carers make to society, whatever their income. Cutting it would be deeply unfair.
‘The government claims it can’t afford to pay wealthy families child benefit but because of the way the change will come in, families with an income of £84,000 could keep their child benefit while a single parent on £42,500 could lose out. The fact is that two in five households earning over £42,500 will still receive child benefit.
‘Withdrawing child benefit won’t just hit family incomes, it could also hit women’s pensions. Around 350,000 stay-at-home parents or very low-earners could lose up to 12 years’ worth of state pension credits. It is wrong to punish people simply for choosing to stay at home to look after their children full-time.
‘The Chancellor has managed to create a broad coalition of opponents to his child benefit cut. He must put fairness before pride and reverse his ill-conceived withdrawal of child benefit for higher rate taxpayers in the Budget next week.’
Child Poverty Action Group Chief Executive Alison Garnham said: ‘The child benefit plans now look like another strike on women’s financial security, which brings with it greater risks for children too.
‘The Chancellor needs to scrap the child benefit cut and find a much fairer way of ensuring that all higher rate taxpayers are contributing their fair share to reducing the deficit, not just families with children.
‘Women are already disadvantaged enough under the current pension system, and they are already being targeted far too much by the cuts. The public clearly want higher rate taxpayers to contribute their fair share to deficit reduction, and rightly so, but this is not the way to do it.
‘The more the child benefit clawback policy is scrutinised, the bigger a mess it looks.’
NOTES TO EDITORS:
– The TUC-commissioned analysis is of the Family Resources Survey, published by the Office for National Statistics. The full figures, as well as the TUC analysis, are available from the TUC press office.
– Class 3 national insurance credits for non-working child benefit recipients are currently available to parents of children up to 12 years old. They are not available for non-working parents with children aged 12 and over.
– All TUC press releases can be found at www.tuc.org.uk
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Press release (900 words) issued 14 Mar 2012
Added by me: If the TUC had lent fewer of their resources to a political party committed to the invisibility of these women to political debate, the way gender has just been exploited may have been discussed.