Do you know that your Child Benefit claim affects your State Pension entitlement?
Child benefit used to be paid automatically to all parents of children aged 16 or under no matter the level of the parent’s income. This changed in January 2013 when it became means tested.
- If both parents each earn less than £50,000 a year, they will be entitled to the full amount of child benefit.
- If one / both parent(s) earn between £50,000 and £60,000 a year, the parent with the highest income will be liable to a ‘high income child benefit tax charge’. This will, in effect, reduce the child benefit received by 1% for each £100 earnings over £50,000.
- If one / both parent(s) earn over £60,000 a year, the tax charge will effectively reduce the value of the child benefit payment to nil.
If your first child was born since 2013 and you don’t claim child benefit because of these rules, you could be putting your state pension at risk.
Why does not claiming child benefit affect your pension?
To qualify for a full state pension you need 35 years’ of National Insurance (NI) credits or contributions – less than 35 years credits will qualify for a reduced state pension.
In some cases you may be able to get NI credits when you do not pay National Insurance, for example when claiming certain benefits including child benefit.
Credits can help to fill gaps in your National Insurance record to make sure you qualify for certain benefits including the State Pension.
Who does this affect?
You could be reducing your full state pension if ALL of the following apply:
- You have a child who was born on or after 1 Jan 2013 and either have no other children or children who are older than 12 by 1 January 2013.
- You either don’t work or do not earn enough to qualify for NI credits i.e. earnings less than £5,876 in 2017-18.
- You have a child aged under 16 but do not claim child benefit.
If you think you may be affected contact us now for help and advice