- The parties have announced policies to support parents, from more childcare places to a change to the High-Income Child Benefit Charge.
- To help overcome the damage that becoming a parent can do to your pension, HL would like to see two things change: how people qualify for National Insurance credits; and the tax-efficient pension contributions that can be made for a non-earner.
- Parents are more likely to support a party that offers more help with childcare (17% among those with children at home and 8% for those without).
- Parents are also more likely to favour a party planning to cut tax on investments (13% among those with children at home and 9% for those without) and cutting inheritance tax (18% for those with children and 15% for those without).
Figures from a survey of 2,000 people by Opinium for Hargreaves Lansdown, April 2024.
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“As a parent, you learn very quickly not to get your hopes up. For every dad looking forward to cards and breakfast in bed on Father’s Day, there will be plenty who are preparing for oblivious toddlers or angry teenagers. However, life is so expensive for parents, that many can’t help but hope that whoever forms the new government will step in.
Major parties have made commitments to supporting families. The Conservatives are currently rolling out free childcare for children aged nine-months and over – which will be fully in place from September 2025. They have also reiterated their plan to move to a household basis for calculating the High-Income Child Benefit Charge. This would mean a single person, or a couple, could earn £120,000 as a household before having the benefit withdrawn.
Labour has announced 100,000 childcare places in 3,300 nurseries in schools, paid for by VAT on private schools. Its missions also include plans to introduce free school breakfast clubs and bring in more specialist maths and science teachers. The Liberal Democrats have pledged to introduce a ‘dad month’ – increasing paid parental leave from two to four weeks and doubling paternity pay to £350 a month. We are expecting more in the manifestos, and there’s a real opportunity to consider vital changes.”
What we want to see
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:
“We want to see changes to help overcome the damage that becoming a parent can do to your retirement plans. Your partner can make contributions to your pension while you’re not working, but at the moment they’re limited to tax relief on £2,880 a year – taking the full contribution to £3,600.
This limit was introduced way back in 2001, and hasn’t increased by a penny since. If it had risen with inflation, it would be £6,530, so the limit needs to be revisited. The amount of money people need in retirement is increasing with inflation – so the amount that can be contributed tax-efficiently while you’re not working needs to do so too.
Inflation-linked rises in thresholds should be a given. Pensions are something we all need to be in for the long haul, so we need stability and predictability in areas such as pensions taxation, so people have the confidence in their retirement planning that they need.
We also want to see a change to the way parents qualify for National Insurance credits. In order to get the full state pension, you need 35 years’ worth of National Insurance contributions. If you’re taking time off work for caring responsibilities for a child, you can receive National Insurance credits to fill these years instead.
However, this is fraught with potential problems, because the credits are linked to claiming child benefit. At the moment, one in ten parents don’t apply for child benefit at all. This owes much to the High-Income Child Benefit Charge, which means anyone earning over £60,000 has to pay at least part of the benefit back. Not all parents are aware they can claim the benefit and opt out of getting payments, so they don’t make a claim at all – and miss out on the credits. Even among those who claim it, in some cases this is done in the name of the working parent, which means the non-working parent doesn’t automatically receive the credit.
All of this complexity and confusion could be removed if the right for non-earning parents to receive NI credits was linked to the registering of the birth instead – which all parents have to do within 42 days of the child being born.”
What parents are hoping for
Sarah Coles:
“Parents with children living at home have most of the same priorities as the rest of the country, with the top five including cutting council tax, cutting income tax, pledging not to increase the state pension age, keeping the triple lock, and increasing taxes specifically to pay for the NHS.
Aside from priorities that tend to differ with age (like support for the triple lock), the most striking variation between parents and non-parents is around childcare. Almost one in five (17%) parents would be more likely to vote for a party that offered more support with childcare, compared to fewer than one in ten (8%) of those without children at home.
Parents are also more likely to support a party that was committed to cutting tax on investments (13% among those with children at home and 9% for those without). This is likely to be because parents with children at home are more likely to be investors. They know only too well the challenges posed by the slashing of the dividend tax and capital gains tax allowances, and the need for whoever forms the next government to consider increasing the ISA allowance.
In the interim, it’s worth taking advantage of tax-free investments, including the Junior ISA. As the tax regime gets increasingly tough, it’s even more important to consider investing for the next generation in a way that protects them from tax.
Parents are also slightly more likely to vote for a party which promised to cut inheritance tax (18% for those with children at home and 15% for those without). For parents who are keen to provide for the next generation after their death, this feels like an important issue, because they don’t want to leave their legacy to the taxman. However, for those who want to support their children throughout their lives, more generous gifting allowances would make a bigger difference, which underlines the need for any government to revisit the rules more holistically, rather than opting for a single headline-grabbing tax cut.”
