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Parents beware - Child Benefit - Don't lose out on State Pension

When the Government changed Child Benefit to make it means tested, where if one person in the household earned more than £60,000, they would effectively lose some or all of the available Child Benefit. Where the highest earner in the household has income that exceeds £50,000, they need to pay back 1% of the total child benefit available for every £100 that the highest earner in the household earns over £50,000. This effectively reduces Child Benefit to £0 once income exceeds £60,000.

A little known issue is that for those earning over £60,000 with young children, they wouldn’t receive any child benefit and so simply do not bother with the forms. Why would you if you are not going to get the benefit?  However, for the person in the household who may have given up work or works part time and not have sufficient income to pay National Insurance, they are not getting any credits towards entitlement to their State Pension. 

The DWP website gov.uk/child-benefit-tax-charge states the following: 

If you’re affected by the tax charge

You can choose not to get Child Benefit payments, but you should still fill in the Child Benefit claim form. This will help you get National Insurance credits which count towards your State Pension.

Claiming Child Benefit also means your child will get their National Insurance number automatically shortly before they’re 16. They won’t have to apply for one themselves.

As such, anyone not eligible for Child Benefit because one person in the household has income that exceeds £60,000, the claim form should still be completed and submitted. Otherwise a parent could find themselves with a much reduced state pension entitlement if they were the main carer of their children while they grew up.  

It’s not an insignificant amount. Because the full state pension entitlement is achieved after 35 qualifying years of NI contributions, including credits for time taken to look after children, any reduction in the weekly state pension times the number of weeks it would be paid for during retirement adds up. Even if the child benefit entitlement might be nothing because of the means testing, it is worth every penny to complete the form in order to ensure a full State Pension entitlement is available for when you retire.

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