An ongoing issue women face in the workplace is the gender pay gap and related pension gap. Research has shown that there is as much as a 30% difference in the amount of retirement savings put away by men than women. This difference is likely the result of the gender pay gap, and the amount of time women take off for childcare.
The pension gap is the widest later in life, with men in their 50s saving around 40% more than women of the same age bracket.
But That’s Not All
But there’s another threat to women’s pension savings, besides the pay gap – Child Benefit rules.
In 2013, the UK government made adjustments to the Child Benefit claim rules. The new rules stated that if one parent earned over £60, 000 a year, they would not be paid the Child Benefit. If one of the parents made between £50, 000 and £60, 000 a year, the benefit would be tiered at 1% for every £100 over £50, 000.
This resulted in many parents not applying for Child Benefit because they wouldn’t receive a payment under the new income rules.
The dangers of not claiming Child Benefits
If you don’t claim the benefit, you also waiver your right to National Insurance credits.
National insurance is deducted from your salary when you work, and you can National Insurance credits when you’re entitled to certain benefits.
Many women didn’t apply for Child Benefit, under the assumption they weren’t eligible to receive it, but who didn’t return to their jobs after having their child. This will create a National Insurance credit gap of several years.
Did my child benefit contribute towards my state pension?
Yes, since claiming child benefit means receiving National Insurance credits. Then consequently, your National Insurance contributions will also affect your State Pension. You need 35 years of payments to be able to claim the full State Pension once you retire.
Parents must claim for Child Benefit to make sure they get their National Insurance credits. They can them opt out of the payment depending on their salary bracket or pay back the benefits via a tax charge.
Can I backdate my claim?
The time limit on backdated Child Benefit claims is 3 months. If you realise you have a gap in your National Insurance record later than that, it cannot be rectified. Check your record on the government website to make sure1.
What action can I take?
Do yourself a favour and claim for Child Benefit if you’re a stay-at-home parent and currently not working. This claim will ensure you get your National Insurance credits.
Suppose you’ve checked your National Insurance record and find you’re short. In that case, you can top up with voluntary National Insurance contributions to ensure you meet the criteria for a full State Pension.
The UK government has the following information on Child Benefits:
- All customers eligible for Child Benefit have to claim it to protect their National Insurance contributions record. This will also automatically get them a National Insurance number for their when they turn 15 years and nine months.
- Customers who have claimed for Child Benefit but fall into the High-Income Child Benefit Charge bracket can either opt-out of receiving payments or can pay a tax-charge on the payments received.
- Those earning between £50, 000 and £60, 000 will have a tax charge proportional to the Child Benefit, at 1% for each additional £100. For those with an income is over £60, 000, the amount is equal to the Child Benefit received.
- Not everyone will need these National Insurance credits to keep their eligibility for their full State Pension, as they qualify through their contributions over the years or by receiving for another reason
- Under the new State Pension rules, most parents will be entitled to a full State Pension after 35 qualifying years. This means they are likely to qualify for the full State Pension even if they have some gaps in the National Insurance contribution record.
- You can check the forecast for your State Pension online through the Check your State Pension service. This portal also has information on how to register for National Insurance credits or make voluntary contributions.
Got Questions? Check These First
I'm a High-Income Earner – Should I Apply for Child Benefit?
You should still claim for Child Benefit to protect your National Insurance record. Claiming Child Benefit will also automatically get your child’s National Insurance number when they turn 15 years and nine months. If you fall into the High-Income Child Benefit Charge bracket, you can either opt-out of receiving payments or can pay a tax-charge on the payments received.
How Does Child Benefit Affect My Pension?
Claiming Child Benefit gives you the right to National Insurance credits. These credits are essential when it comes to applying for your state pension. To qualify for a full state pension, you must have 35 years of National Insurance Contributions or credits once you retire.
How can I top up my National Insurance Contributions if I didn't claim Child Benefit?
The first step is to check your National Insurance record with the online State Pension checker to establish the contribution gap. If you find yourself short, you can buy voluntary National Insurance contributions.
What Are the New Child Benefit Rules?
The UK government made adjustments to the Child Benefit claim rules in 2013. These rules stated that if one parent earned over £60, 000 a year, they would not be paid the Child Benefit. Parents who earn between £50, 000 and £60, 000 a year, would receive a benefit tiered at 1% for every £100 over £50, 000.
To ensure you don’t miss out on your full State Pension entitlement, you should claim Child Benefit as a parent. This includes households which might fall into High-Income Child Benefit Charge bracket.