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Thousands of parents miss out on their full state pension entitlement

Complications with child benefit forms result in pension cuts

‘Tens of thousands’ of parents could be missing out on their full state pension entitlement because of complications with child benefit forms.

Here, we reveal why some parents are losing out and explain how you can ensure you get your full state pension entitlement.

What is child benefit?

Child benefit is a payment made by the government if you are responsible for a child under the age of 16 (or 20 and in an approved form of education and training.)

These payments are tax-free if both you and your partner each earn less than £50,000 a year.

If you’re eligible for child benefit, you’ll receive £20.70 a week for your eldest child (or only child) and £13.50 a week for each additional child.

The table below shows the child benefit rates for the 2018-19 tax year:

No. of children Child benefit (per week) Child benefit (per year)
1 £20.70 £1,076.40
2 £34.40 £1,788.80
3 £48.10 £2,501.20
4 £61.90 £3,213.60
5 £75.50 £3,926

Why are parents missing out on state pension?

If a parent takes time out of work to care for a child, they can apply for child benefits to maintain their state pension entitlement.

Many, however, are missing out because of complications around completing child benefit forms.

Child benefit claims can only be back-dated by three months – so you could be at risk of losing thousands of pounds in retirement income if you leave it too long to fill in your forms.

Sir Steve Webb, director of policy at Royal London, and former pensions minister, says: ‘When people are unable to pay National Insurance contributions because of caring responsibilities, it is vital that their state pension record is protected.

‘So many people have missed out in recent years, and it is vital that HMRC relaxes the three-month backdating rule on claims.

‘Without this, tens of thousands of mothers will have done permanent damage to their state pension record.’

A spokesperson for HMRC told Which?: ‘HMRC is always looking at ways in which it can improve its communications further, both at the birth of a child and for existing child benefit claimants.

‘No-one should miss out on the state pension and HMRC has always urged families to claim child benefit to help protect their future right to the state pension.’


Child benefit payments for higher earners

There are also complications for parents who don’t realise that they still need to apply for child benefit even if they don’t want to receive payments.

Child benefit payments where one parent earns between £50,000 and £60,000 a year are subject to a ‘high income child benefit tax charge’, which reduces benefit payments by 1% for each £100 earned over £50,000.

Some couples choose to opt out of child benefit altogether so as not to attract this tax, but risk losing out on state pension by doing so.

It’s possible to apply for child benefit at a ‘zero rate’ which means that, while you won’t receive any benefit payments, you will get National Insurance credits – which go towards building your state pension entitlement.

Why does child benefit affect your state pension?

Your entitlement to the state pension is based on your National Insurance contributions. 

If you reach state pension age after 6 April 2016, you’ll need 35 years of National Insurance contributions to get the full state pension, and at least 10 years to get any state pension at all.

If you reached state pension age before 6 April 2016, you need 30 qualifying years of National Insurance contributions to get the full state pension.

National Insurance contributions are made while you’re in employment, but if you’re out of work because you’re taking care of a child, are unemployed or ill, you can maintain your record by applying for National Insurance credits.

Any tax year (April 6 to April 5 the following year) that you claim child benefit counts as a qualifying year towards your state pension entitlement, until your youngest child is 12.

If your claim falls outside of the full tax year, you will end up missing state pension qualifying years.

Only one person in a family can claim child benefit in order to receive National Insurance credits to help build up their entitlement, so it’s important that the person who is staying home to look after the children is the person registered to receive child benefits.

Where can I check my state pension?

You can check your state pension by using the ‘check your state pension’ tool provided by the government, or by accessing your Personal Tax account.

The tool can help you identify the following:

  • How much state pension you could get
  • When you can get your state pension
  • How to increase your state pension (if possible)

More details about your state pension breakdown can also be provided by the Future Pensions Centre for the Department for Work and Pensions.

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