Lots of couples decide that one of them is going to reduce their work hours or stay at home full time to look after their children. This doesn’t just mean less household income right now, it can mean less State Pension in the future for the lower earning parent.
Child Benefit payments are there to mitigate that loss of income, which is a great help. But the system also has help with State Pension payments built in it’s just that lots of people don’t know about it.
How are the Child Benefit system and your state pension connected?
If you don’t earn the full amount of National Insurance Contributions (NICs), you don’t get the full State pension. It takes 35 years of uninterrupted work to pay enough NICs for your full State Pension entitlement. So if you take any time away from work to raise your family, this can become very difficult to achieve.
The important thing here is who claims the Child Benefit payments. If you receive Child Benefit payments, then your NICs record is maintained with credits and your State Pension is protected.
What’s the problem with Child Benefit and pension payments?
Usually, the primary household earner makes the Child Benefit claim. Because their account is the one most often used for household bill transactions. And it just makes sense to have everything coming and going from the same account.
But it’s their partner, who’s earning less, that needs to keep their NICs record intact. They’re already earning enough to secure that with their salary.
Over 200,000 couples are missing out on their pension payments because the wrong parent is claiming their Child Benefit.
How much state pension can I lose?
For every year that you don’t pay the required amount of NICs, your State Pension amount is reduced by £260 per year. If you’re retired for 20 years, that’s £5,000 you’re losing out on.
If you take four years away from work to raise your child to four years old and don’t claim Child Benefit in your name, you lose £1,040 from your State Pension.
How do I contact HMRC about child benefit and the state pension?
The good news is that you can fix it.
Get in touch with HMRC’s dedicated Child Benefit department to check your position on 0300 200 3100.
It might be fine, and you’ve not missed enough NICs payment to make a difference to your State Pension.
But if you do need to plug a NICs credits gap, all you need is the right form:
- CF411A ‘Apply for National Insurance credits if you’re a parent or carer’: if you need to switch which parent is making your Child Benefit claim.
- CF411 ‘Apply for National Insurance Home Responsibilities Protection’: if you need ot make a backdated claim (deadline 2010).
Both forms can be completed and sent either by printing and posting, or online through your Government Gateway account.
While you’re thinking about your finances…
…check you’re not missing out on any work expense or allowances. They can be backdated for four tax years, so don’t assume this doesn’t apply to you because you’ve become the main home carer.
Lots of people still aren’t claiming for the tax relief they’re entitled to and it’s such a waste of their hard earned money. We’ll check your and your partner/spouse’s situation and see if you’ve missed out on anything so far. Simple costs like:
- Working from home
- Uniform cleaning
- Buying your own tools and safety equipment
- Membership fees of professional organisations and Trade Unions
- Mileage and travel costs to temporary workplaces
- Subsistence costs when you work away from home
To get started you can use our free income tax guides to gather more information and find out how to claim.
