I don’t qualify for child benefit any more so will I lose credits towards my state pension? Steve Webb replies
Recently I have moved in with my partner and no longer work or receive child benefit because my partner earns too much money.
I am worried that my National Insurance credits have stopped and don’t know what I can do or if it will affect my pension. I am 35 years old.
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Retirement planning: I don’t qualify for child benefit any more so will I lose state pension credits?
Steve Webb replies: If you are no longer in paid work and no longer paying National Insurance contributions then it is vitally important to make sure that everything is in order regarding the NI credits which you may be able to get as a parent.
In normal circumstances, if you are receiving child benefit for a child under 12 then you should automatically get National Insurance credits towards your state pension.
These credits go to the person who claims the Child Benefit (though there are ways to get the credits transferred to their partner if the claimant does not need them).
Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below
Credits may also be available if you are a foster carer, though it is necessary to apply for these.
These credits are very valuable because a year of credits now makes exactly the same contribution to your state pension as a year in paid work.
Both count as one ‘qualifying year’ towards your final pension.
Unfortunately, since the ‘High Income Child Benefit Charge’ was introduced in 2013, some higher income couples have decided not to claim child benefit.
This is because the higher earner in the couple can end up getting a tax bill which wipes out some or all of the value of their child benefit.
However, for a couple in this situation a better approach is to make a child benefit claim and then tick the box that allows you to decline the cash payment but accept the National Insurance credits.
This is shown below in the excerpt from the Child Benefit claim form.
To avoid the tax charge but benefit from the NI credits, you can tick the box at Question 62 on the form to say ‘No, I do not want to be paid Child Benefit but I want to protect my state pension’.
Your situation is slightly different as it sounds as though you were previously getting child benefit but have decided to stop getting it.
My understanding is that as long as you were in the system already and simply renounced the cash payment, you should still go on getting NI credits.
But the simplest thing to do would be to contact the child benefit helpline and simply ask them to confirm that you are still getting credits.
If you are not, they should be able to tell you how to put this right.
I would encourage every parent to claim their NI credits even if they do not want the child benefit.
There is a very strict deadline of three months’ backdating on claims, which means if you do not make a claim and sort things out at the time, it can be too late to fix things if you realise your mistake years later.
Fix ‘seriously broken’ child benefit system that unfairly deprives parents of state pension in old age
Parents – mostly mums – can end up tens of thousands of pounds worse off in retirement by failing to claim child benefit because they aren’t entitled to receive the payments.
This is Money and Steve Webb have long campaigned against the Government unfairly condemning many mums and dads to a poorer retirement over innocent child benefit errors.
We argue that state pension credits should be fully backdated when someone realises their mistake and claims child benefit, not just the last three months.
Meanwhile, couples have been caught out when the ‘wrong’ partner -the one already paying NI towards a state pension – fills in the child benefit form.
HMRC has changed the system for parents trying to correct these errors, so find out how to argue your case here.
Have you lost state pension by not signing up for child benefits or filling form in wrong?
If this has happened to you, contact [email protected] and tell us your story.
Do you know a parent who might be losing valuable state pension credits? Send them a link to this story.
Ask Steve Webb a pension question
Former Pensions Minister Steve Webb is This Is Money’s Agony Uncle.
He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.
Steve left the Department of Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock.
If you would like to ask Steve a question about pensions, please email him at [email protected]
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