Did you know that claiming Child Benefit could mean you get more State Pension? Retirement might be the last thing on your mind when you’re looking after a new baby, but what you do now could have a big impact on your future finances.
Protecting your State Pension
Despite what you might think, no one automatically gets the full amount of State Pension when they retire.
You’ll only get the full amount if you’ve paid, or been credited with, National Insurance contributions for 35 years.
The key word here is ‘credited’.
Even if you’re not working while looking after your baby, you’ll get National Insurance credits when you claim Child Benefit until your youngest child is 12.
The credits are automatically added to your National Insurance account when you claim Child Benefit, so you don’t need to do anything.
If you reach State Pension age on or after 6 April 2016, you’ll get the new State Pension.
The full amount of the new State Pension will be £155.65 per week.
What is Child Benefit?
Child Benefit is a regular payment from the government to help with the cost of raising a child.
You can claim Child Benefit for each child you’re responsible for if they’re:
In the 2015-16 tax year, you could get:
- £20.70 per week for your first child
- £13.70 per week for any further children
Payments are tax-free as long as neither parent earns more than £50,000 a year.
If you earn more than this you’ll have to pay back some of the money in the form of extra Income Tax.
This is called the ‘High Income Child Benefit Charge’.
How to claim Child Benefit
To claim Child Benefit, you’ll need to fill in a Child Benefit claim form (CH2).
Send it to the Child Benefit Office along with your child’s original birth or adoption certificate.
Even if you don’t think you’ll be entitled to anything because either you or your partner earns over the £50,000 tax-free limit, it’s still worth claiming so you don’t miss out on National Insurance credits.
If either of you earns over £60,000, you can always opt not to receive the payments - and avoid the tax charge - but still get the entitlements.
If you’re a foster carer
If you’re a registered foster carer, you’ll need to apply to HM Revenue & Customs (HMRC) for National Insurance credits.
Transferring National Insurance credits
If you’re working and getting Child Benefit, you might be building up more National Insurance credits than you actually need.
The good news is, you can transfer them to your partner if they aren’t working or are on a low income and not paying National Insurance contributions.
You can make transfer claims on a yearly basis after the end of each tax year.
You can also transfer National Insurance credits to someone else in your family, such as a:
- Grandparent, or
- Other direct family member.
If they look after your child (under the age of 12) for at least 20 hours a week.
They don’t need to be registered childminders.
These are commonly known as ‘grandparent credits’.
Protecting your additional State Pension
The additional State Pension is an extra pension that employees (but not self-employed people) mIGHT be building up.
You also get National Insurance credits towards the additional State Pension if you’re claiming Child Benefit for a child under 12.
The additional State Pension is being abolished from 6 April 2016 and you won’t be able to build up any entitlement to it after that date.
If you reach State Pension Age after 6 April 2016, you’ll get the new State Pension instead.
You can rest assured that any additional State Pension you’ve already built up will be protected.
This means your new State Pension, as of 6 April 2016, won’t be any less than the amount of basic and additional State Pension you’re entitled to under the current system.
How to get a State Pension statement
It’s easy to check how many years of National Insurance contributions you currently have and how much State Pension these might give you.
You can also work out how many more years – if any – you need to get the full State Pension.
“I have to manage now on just over £160 a week – that’s State Pension, a very small work pension and Pension Credit. Of course I didn’t think about pensions when the children were growing up. But now I’m retired and divorced, I wish I had. If I had my time again, I would definitely make a few sacrifices to be able to put something aside for old age. You think retirement will sort itself out but it doesn’t – you have to plan for it.”
Rita, 69 years old
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