More than 200,000 parents are facing a smaller state pension because of a complicated bureaucratic situation involving child benefit of which they are unaware.
Chair of the Treasury Committee Nicky Morgan MP has called on the government to "pull its finger out to make sure people are aware of the issue and know how to put it right."
Ms Morgan made the comments after HMRC wrote to the committee to confirm the number of people who could miss out could top 200,000.
To receive the full state pension, you need to make 35 years of National Insurance contributions.
Parents with children under the age of 12 are entitled to continue building up National Insurance Credits in the years they are not in paid employment so that their state pension record is not compromised because they have been at home looking after their children.
To apply for the credits, parents must apply for child benefits and the National Insurance credits are applied automatically.
This system, although convoluted, works for most parents. 7.9 million households in total receive child benefits, so the vast majority have no issue.
Where parents are caught out is where they do not apply for child benefit because they are not eligible for it. This tends to be when one parent is earning over £50,000. Many do not realise that by not registering for child benefit they also are not registering for National Insurance credits.
When they discover their mistake, most are unable to remedy it as contributions can only be back claimed for three months. It can lead to state pension shortfalls worth tens of thousands of pounds.
Problems can also arise if the earning parent in a household receives child benefit rather than the parent with low or no income. In this case the latter parent can lose out of contributions and therefore state entitlement. This can be remedied, however the Select Committee today said more must be done to inform parents of the situation and potential consequences.
Nicky Morgan MP, chair of the Treasury Committee, says the committee has “long warned” the government that non-working parents would be at risk of missing valuable NICs.
She adds: “Now we have an idea of the scale of this problem, the government needs to pull its finger out and make sure people are aware of the issue and know how to put it right.”
Unfortunately, HMRC only allows for three months of back claims if you discover you have been missing out on NICs entitlement. It is critical that if you find yourself in this situation to rectify it as soon as possible.
To find out if you are entitled to claim NICs, check the government website: https://www.gov.uk/national-insurance-credits