To be eligible for a full state pension you need to have paid or received credit for National Insurance Contributions (NIC) for a minimum of 30 years. For each year less than 30, your full state pension is reduced by 1/30.
That means that if you’ve paid NIC for 15 years only your full state pension is reduced by ½. Well it’s not very large to start with (currently £110.15 per week), so you certainly don’t want to receive less than that.
But what if you’re a stay at home mum looking after young children?
If you are, it may be that by retirement age you won’t have paid NIC for a full 30 years due to the time you were out of the work place bringing up a family.
If this is the case, then Child Benefit can help you qualify for National Insurance credits.
National Insurance credits are available to you if you receive Child Benefit for a child under 12. This will continue until your youngest child reaches the age of 12.
So for example, if you had 3 young children each born 2 years apart your credits will continue for 16 years: 12 years for your first child and then an additional 2 years for each of your other children until they reach the age of 12.
But what if you or your partner earn more than £50,000 and are affected by the change in Child benefit rules?
Under existing legislation if you or your partner earns more than £50,000 you may be liable to a tax charge called the “High Income Child Benefit Charge”.
In order to avoid this charge you may decide not to receive Child Benefits. But if this is the case you should still fill in a Child Benefit claim form. Doing so will ensure you will still qualify for credits to protect your state pension.
If you were getting Child Benefit before 6th April 2010
If you were getting Child Benefit before 6th April 2010 for a child aged under 16 you automatically qualified for the Home Responsibilities Protection (HRP) scheme. The HRP scheme was designed to protect your state pension and has now been replaced by the National Insurance credits scheme.
Protection built up under the HRP scheme will be converted to the National insurance credits scheme (up to a maximum of 22 years) to count towards your basic state pension.
So even though you may not wish to receive Child Benefit do make sure you complete the claim form. Otherwise you may find you will not be eligible for the full state pension. Don’t wait until you get to state pension age to realise there’s something wrong. Act now so you have time to correct the situation.
If you have any specific issues that you’d like to discuss regarding your circumstance please do call me on 01932 698150, so we can have a chat about your situation.