UP to one million couples are being urged to check their child benefit claims over fears they could lose out on £40,000 later in life.
Families could be missing out on National Insurance credit – which counts toward your state pension – if they make a child benefit claim under the highest earner in their household.
Couples are being urged to check if they can claim missing National Insurance credits
Under current rules, someone who receives child benefit for someone under the age of 12 is also treated as if they had paid National Insurance contributions for that week.
But these contributions only go towards the person who physically claims the benefit.
It means if the lower earner in the household isn’t the person who made the claim, they’re missing out on National Insurance credits that count toward their state pension.
You need at least 10 years’ worth of NI contributions to get any state pension, and 35 years to get the full new state pension.
The full new state pension is £175.20 per week.
A Freedom of Information request by pensions and investments firm LCP has shown there are currently 200,000 couples where the highest earning partner is claiming child benefit.
But older parents whose children have now grown up may also have historic gaps in their NI record.
For this reason, LCP says up to one million couples could be affected.
There is a process where families can reallocate their NI credits – we explain below.
LCP has heard from one couple where the wife is set to get eight years’ worth of NI credits reallocated to her.
This will give her an extra £2,000 per year boost to her state pension, working out at £40,000 over a typical 20-year retirement.
It is worth noting that not everyone who misses out on child benefit NI credits will necessarily have a reduced state pension.
You may earn the contributions you need during the rest of your working adult life, in which case you wouldn’t need to worry about any missing credits.
The amount you could be short by through missing out on child benefit NI credits also varies depending on your individual circumstances.
LCP estimates being one year short of the NI contributions you need could cost you around £5 per week through your state pension.
This would equate to £260 per year or £5,200 over a 20-year retirement.
Sir Steve Webb said: “The majority of those who are currently missing out are mothers with young children.
“It is simply unacceptable that they should suffer a pension penalty as a result.
“HMRC needs to do much more to make people aware of the impact of the choice over who gets child benefit.”
How to transfer National Insurance credits
If you’re in a couple and you want to transfer NI credits, you’ll need to fill out a form CF411A.
This form can be found on the Gov.uk website and can be filled out online or sent via post.
For claims before 2010, you’ll need to fill out form CF411 – this can also be found online on Gov.uk.
If you do decide to transfer credits to your partner, you should make sure you’re likely to have enough yourself so that your state pension isn’t affected.
HOAR has contacted HMRC for comment.
Millions of parents are getting a child benefit payment boost as of this month.
Parents have lost out on £6.8billion since the child benefit cap was introduced in 2013.
Meanwhile, thousands of parents have been warned they could be forced to repay child benefits.