How claiming Child Benefit can protect your State Pension
If you have children under 12 and you are looking after them full time, or you work but don't earn enough to pay National Insurance contributions, then you can qualify for 'credits' which count towards your State Pension.
How will National Insurance credits protect my State Pension?
Your basic State Pension is based on a number of 'qualifying years' built up during your working life. A qualifying year is one where you earn enough money to pay National Insurance contributions, you will need to have 30 qualifying years to obtain a full State Pension.
For each week you receive Child Benefit you could qualify for:
- weekly National Insurance credits that can go towards your future entitlement to the basic State Pension
- but also weekly Earnings Factor credits that can go towards your future entitlement to the State Second Pension (also known as S2P)
Who qualifies for National Insurance credits?
New National Insurance contribution credits were introduced by the government from the 2011/12 tax year.
You qualify for credits if you receive Child Benefit for a child under 12 and will continue until your youngest child reaches the age of 12.
You will have to claim the credits, they will not be automatically added to your NI contribution record. You can start to claim credits for the tax year 2011/12 from October 2012 although they will not appear on your NI record or State Pension until after April 2013.
For more information visit HMRC National Insurance credits
Can I qualify for National Insurance credits for years prior to 2011/2012 tax year?
If you were getting Child Benefit for a child under the age of 16 between 6th April 1978 and 5th April 2010 you automatically qualified for a scheme called Home Responsibilities Protection (HRP) which helps to protect your State Pension.
If you receive State Pension on or after 6th April 2010, any complete tax years of HRP (up to a maximum of 22 years) will have been converted into full years of credit that count towards your basic State Pension.
If you received Child Benefit for a child under the age of 6 you also automatically built up entitlement to an additional pension through the State Second Pension (S2P).
To check you have been allocated the correct amount of credits contact:
HMRC - TEL: 0845 302 1479
or download a claim form here:
Changes to Child Benefit rules and why you should claim it even if not entitled to
From 7th January 2013, if one parent in the household earns more than £50,000 they will be liable to pay the new child benefit tax. This tax will gradually reduce the effect of child benefit by extra income tax payments. Once one parent earns over £60,000 child benefit will effectively be cancelled out by the increased income tax.
Some new parents, with one earning over £60,000, may feel that it is pointless claiming Child Benefit under the new rules, however, as you can see above not claiming could reduce your future State Pension. For example where the child benefit is paid to the wife, who cares for her children full time, while the husband works and earns over £60,000 a year. If the wife stopped claiming child benefit then she won't necessarily receive NI credits which count towards her basic State Pension.
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