Hundreds of thousands of parents who receive money from ex-partners for their children are set to see funds slashed under new child maintenance plans.
Around 440,000 parents currently use the child maintenance service (CMS) direct-pay service to pay the costs, a fee-free option.
However, 310,000 parents instead use the ‘collect and pay’ service, which costs 4 per cent to the receiving parent, and 20 per cent to the paying parent.
But new plans announced by the government will see all parents required to use a new collect and pay service, with slightly different rates. This would mean both the paying a receiving parent are charged 2 per cent.
In practice, this means that on a £100 payment, the paying parent would pay £100, while the receiving payment would be paid £98.
Child maintenance is paid when parents separate and one parent does not live with the child. This parent will pay the other the necessary costs to help cover the child’s living expenses.
Parents who do not pay the agreed amount of Child Maintenance can have money deducted from their income by CMS, or be taken to court by the government body.
Baroness Sherlock OBE, work and pensions minister in the Lords, says the changes have been announced to increase the number of effective maintenance arrangements between parents.
Data released by the department shows that only 60 per cent of parents using the direct-pay option report getting all the child maintenance they are owed, while only 40 per cent say they always receive these payments on time.
Ms Sherlock adds that child maintenance keeps approximately 120,000 children out of poverty a year, but said “we need to, and we plan to, do better.”
Announcing the changes, she added: “The Child Maintenance Service is one of those rare things: a public service that most people hope they’ll never need. But when it is needed, it does a crucial job in helping to ensure children get the financial support they need.”
“Any family can break up, but children should not fall into poverty or go without because of a breakdown in relationships between parents. When this does happen, they need the Child Maintenance Service, and the current system is not working.”
Ms Sherlock also confirmed that the Department for Work and Pensions (DWP) is intending to consult on reforms to how child maintenance is calculated. There are currently several rates of child maintenance that can be paid, which is based on the paying parents weekly income.
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