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More than 214,000 parents could lose THOUSANDS if they don’t apply for ‘no-brainer’ benefit
EXCLUSIVE: We explain how to avoid missing out
HUNDREDS of thousands of parents are set to be thousands of pounds worth off in retirement due to not applying for a no-brainer benefit, The Sun can reveal.
Every parent in the UK can apply for child benefit to help with the costs of raising their child.
The benefit is worth £25.60 a week for your eldest child, and then £16.95 a week for any subsequent children.
For a family with two children who qualify, this adds up to £2,212.60 a year. For just one child, you get £1,331.20 a year.
Over six million families are currently receiving child benefit payments, according to HMRC.
However, hundreds of thousands more could be missing out on an additional "fringe benefit" that comes with it: free National Insurance (NI) credits.
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These credits contribute towards your state pension, and you need 35 qualifying years of NI contributions, either through employment or NI credits, to receive the full amount.
New data obtained by The Sun Money through a Freedom of Information (FOI) request to HMRC has revealed that approximately 214,000 parents fail to apply for the benefit each year, and so could be missing out on those NI credits.
While child benefit is available for all to apply, there is a caveat for higher earners.
If one parent in the household earns over £60,000 per year, a portion of the benefit must be repaid, this triggers the so-called high income child benefit charge.
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This means a portion of the benefit must be repaid.
Once an individual's income exceeds £80,000, the entire benefit must be repaid.
Many people earning this kind of salary don't bother applying for child benefit because they would have to repay it.
But even if your household falls into this income bracket but one of you takes times out of work, it remains crucial to apply for the benefit, as this secures valuable NI credits for retirement at no cost.
For instance, someone who doesn't work until their child reaches primary school age could miss four years of NI contributions.
This gap could result in a loss of £1,200 per year from their state pension.
Over a typical retirement, this could amount to a potential loss of £30,000 in payments if they claim it until the age of 90.
What are the different types of pensions?
Steve Webb, partner at pension consultants LCP, said: "One of the "fringe benefits" of claiming child benefit is that you are also awarded valuable National Insurance credits which help you build up a state pension even if you are not working.
"What has made matters more complicated in the last decade is the creation of the high income child benefit charge which has put some families off claiming.",
"But in this situation, parents should still go through the child benefit claim process and simply tick the box on the form to say that they want the NI credits but not the cash benefit.
"This way you protect your state pension but without having to worry about the high income charge."
What is the high income child benefit charge?
IF you apply for child benefit but earn over £60,000 or live with a partner who does, you'll have to pay the high income benefit charge.
This is calculated as 1% of your child benefit payment for every £200 you earn over the threshold.
The calculation is done based on your adjusted net income, which is the money you earn after paying things like pension contributions.
However, if you earn slightly over the threshold, you can increase your retirement savings to put you back under the limit and continue to claim.
If you do have to pay the charge, the money is paid back via the higher earner's self-assessment tax return.
Once either you or your partner earns £80,000 you will have to repay all of the child benefit money.
How do I claim the national insurance credits?
A parent can obtain National Insurance credits without receiving child benefit payments by ticking a specific checkbox on the child benefit application form.
Even if you do not wish to claim child benefit, it is necessary to complete the form to inform HMRC that you want the credits instead.
To do this, visit gov.uk/child-benefit/how-to-claim.
You can submit your claim online or by completing the paper claim form and sending it by post.
The relevant question is number 62 on the paper form, shown below.
1
If you fill out the paper form, you need to sign and date the form and post it back with the documents requested to: Child Benefit Office (GB), Washington, Newcastle Upon Tyne, NE88 1ZD.
Steve Webb added: "National Insurance credits can be very valuable and should not be thrown away lightly.
"Just one year of credits adds over £300 per year to your pension in retirement and this doesn’t cost you anything.
"Any parent who has never claimed should get a claim in as soon as possible as currently these will only be backdated for three months."
It is understood that the Government is planning to introduce a new category of National Insurance credits specifically for parents in this situation, aimed at filling the gaps for those who never claimed child benefit and are now past the deadline.
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However, for now, it is unclear how this will be implemented or when it will take effect.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people's National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
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