Child Benefit Claims: Don’t let it affect your state pension rights!

You’ve just had a baby and the midwives at the maternity unit are preparing to wave you off into the exciting new world of parenthood. As you get ready to leave, you are handed a bounty pack full of goodies designed to help give you and your baby the best possible start in life.

But the last thing on your mind is probably the vital paperwork in the pack which needs to be filled in for your Child Benefit claims – and its potential impact on your pension!

The problems spring from changes in 2013 which mean that families where one parent earns more than £60,000 a year incur a tax charge that wipes out the value of Child Benefit.

New research by experts says a growing number of mothers have not bothered registering for Child Benefit because of this – costing them thousands of pounds in state pension rights in the process.

Indeed, Royal London estimates mothers have missed out on more than £500,000 over the last three years. It says the problem has affected 38,000 new mothers already – and predicts that number could rise by 20,000 each year.

In not registering for Child Benefit, you are also not signed up for National Insurance purposes and missing out on the valuable credits towards your state pension rights. If you are registered, even if ineligible for Child Benefit, you receive a year of National Insurance credits towards your state pension if your child is under 12. This means your state pension is protected even if you are not in paid work and have not paid any National Insurance contributions.

Steve Webb, who is a former pensions minister, has called on HMRC to take action to stop this loophole from affecting thousands of women. He said: “Providing NI credits to parents looking after young children is a vital part of the system. It has protected millions of mothers over the years since it was first introduced. But there is now clear evidence that this protection is being undermined.

“In a relatively short period of time, mothers have lost out on hundreds of millions of pounds in state pension rights and this situation is getting worse with every passing year.”

If you fail to register you could end up with a gap in your National Insurance record which could cost you in the long run. To receive a full state pension, you now need 35 years of NI contributions. Each year below that costs £231 – which could add up to nearly £6,000 over a typical 25-year retirement.

You can request a State Pension forecast,  which includes a summary of your National Insurance payments and credits year by year.

A general review of women’s pensions is carried out every year by Scottish Widows, and their figures for 2015 showed that 52 per cent of women felt they were saving adequately for their retirement – up from 40 per cent in 2013.

It also revealed that almost a third of women are optimistic or very optimistic about their financial circumstances – up from 26 per cent a year earlier. And 37 per cent feel good about their short-term finances, although women still put away significantly less than men every month – £105 compared to £177.

If you would like some help with any issues or worries regarding your pension, contact Innes Reid for help on 01244 347583 or email to arrange a consultation.

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