State Pension and Child Benefit
6 February 2019
If you have children and have opted out of Child Benefit you need to ensure you are still getting National Insurance credits for your State Pension.
With the New State Pension, an individual is required to pay into the system for a minimum of 35 years to receive a full State Pension, and 10 years (rather than just one single year previously) in order to receive any State Pension at all.
As such, there is now an apparent dilemma for parents. You may be a mother or father looking after children under 12 full-time and hence not actually paying across NICs. Your family may also be subject to the ‘High Income Child Benefit Tax Charge’ (as a result of either you or your partner earning in excess of £50,000) and therefore you may have opted out of receiving the Child Benefit payments.
These payments are linked to the NIC credits for the carer of the children. Credits are applied to those staying at home, looking after children, as noted above, and count towards your State Pension ‘years’ required. However, if you simply cease the Child Benefit, these credits would no longer be automatically applied as the ‘link’ is broken. This could mean that you may ultimately miss out on receiving any State Pension, or you could receive a lower State Pension due to the reduced number of years NIC credits that you may have.
With a simple form you will still be able to obtain the credits required. You should notify the tax office that you are provisionally entitled to receive Child Benefit in principle, which can be done through a form on the Government website. At this point you would inform them that you are not entitled to the payments as a result of the High Income Child Benefit Tax Charge, but through this process the State Pension credits can still accrue. Given that each year of credit is worth more than £230 per annum in today’s terms in respect of the State Pension, it is worth reviewing your own situation if you have ceased the Child Benefit but are still eligible to claim.
Given such considerations, it is often worth seeking professional advice and Old Mill can help you to calculate your state pension entitlement accordingly.
For further information please contact:
Chartered Financial Planner, Rural Services, Exeter & Yeovil