It has been revealed that many people are completely unaware that claiming Child Benefit affects their State Pension. We explain how you could be impacted.
The HMRC has revealed that parents have “very limited awareness” about how Child Benefit affects their State Pension.
What’s this story about?
In the past, Child Benefit was paid to all parents of children under the age of 16. Back in 2013, however, it was announced that if one parent earned £50,000 they would have to repay some or all of their Child Benefit.
These changes to the rules were revealed to the public by the Government. When they were announced, many people were shocked to find out other things relating to their benefits.
One of the biggest findings was that every year you claim child benefit, you can add £250 to your state pension – even if you need to pay it back later.
The act of claiming the benefit entitles you to a National Insurance Credit, which you can either use yourself or pass onto another family member. These credits (worth £250 a year) are counted towards your State Pension.
Many parents are completely unaware of this perk, meaning that lots of people chose to not claim the benefit in the first place.
How does this affect you?
Everyone with kids can claim Child Benefit. If one partner earns over £50,000, you just need to complete a self-assessment form that says you’ll repay anything you’ve over-borrowed. If one partner earns over £60,000, then the benefit you receive will be wiped away from the amount of tax you pay.
But regardless of how much you earn and whether you need additional support or not, claiming the benefits will mean you’re eligible to receive the National Insurance Credit.
If you’ve got kids and haven't been claiming your Child Benefit, you could be waving goodbye to an additional £250 a year towards your pension.
When you receive the form for the benefit, you can take the money and repay it through extra income tax or alternatively, you can untick a ‘zero rate’ box, which allows you to claim without receiving the cash.
It’s worth doing either way. Jon Greer, head of retirement policy at Quilter, explains:
"Claiming child benefit counts as a National Insurance credit, even when the benefit is wiped out by tax charges.
At the moment high earners who don’t think child benefit is for them need to make sure they always complete the child benefit: claim form (CH2) to retain NI credits"
Head over to GOV.UK for more information on how to claim your benefits and what you’ll receive. If you’re looking for advice on how to keep track of your pension, take a look at our blog.
Disclaimer: All information and links are correct at the time of publishing.