DWP Carer's Allowance shake-up could mean people lose £5,000 in 'ripple effect'

The Labour Party decision to raise National Insurance on employers could cause a "ripple effect" which may see people's pension savings reduced by £5,000. Analysts have warned that the Carer's Allowance hike could be offset by the Labour Party Chancellor's pending tax rate on businesses.

If you spend a lot of time looking after someone with an illness or disability, you may be entitled to extra money in the form of a benefit called Carer’s Allowance. If you are receiving a State Pension, you won’t be able to claim Carer’s Allowance at the same time, but may still benefit from what is known as an ‘underlying entitlement’ to it.

Lisa Picardo, the chief business officer UK at PensionBee, explained: "Changes to employers’ National Insurance Contributions could disproportionately affect carers, who are already navigating the challenges of balancing work with caregiving responsibilities.

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"The increased cost burden on employers may lead to a decline in part-time job opportunities which many carers depend on to navigate their dual responsibilities. Without flexible working options, carers risk being excluded from the workforce entirely."

"This creates a ripple effect, threatening their financial security and independence later in life," Picardo added. "While the planned increase to the earnings limit for unpaid carers in April 2025 is a welcome step, policymakers must ensure that carers are supported, not penalised, for their essential contributions to society.

"Safeguards should be in place to protect part-time work opportunities and the vital role carers play in our communities should be reflected in policies that uphold their financial stability and promote gender equality in the workforce and beyond."

At the moment, the earnings threshold is set at £151 (2024/25) per week after deductions. Even if you are just £1 over this limit, you will lose 100% of your Carer’s Allowance which is currently £81.90 per week in England, Wales and Northern Ireland (in Scotland it is worth more because of the Carer Supplement, but the overpayment rules are the same currently).

If you don’t notify the Department of Work and Pensions ( DWP ) of these changes through the Carer's Allowance Unit or Disability and Carers Service, and Carer’s Allowance continues to be paid when you are not entitled to it, this is then called an ‘overpayment’ and you would receive a notification requiring you to pay it back by the DWP.