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Why high earning households should apply for child benefit

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Written by: Paloma Kubiak
05/09/2018
Stay-at-home parents should apply for child benefit to make sure they get the maximum state pension at retirement - even if their partner is a high earner.

Tens of thousands of parents – predominantly mothers who stay at home to look after children and have no income  – are inadvertently missing out on retirement income to which they are entitled because they have gaps in their national insurance contributions (NIC) record.

To receive the full state pension, you need 35 years worth of NICs. If you have fewer than 35, you will receive lower pay-outs.

But a little-known fact is you can receive national insurance credits by submitting a child benefit claim if your child is under 12, even if you opt out of receiving payments.

The government says some parents fail to claim because they think they may have to pay the High Income Child Benefit Charge, a tax paid if they or their partner are in receipt of child benefit and earn over £50,000. For someone earning over £60,000, the tax charge entirely wipes out the value of the child benefit.  But parents can choose to receive no payments once they’ve applied for the benefit, and this charge won’t apply.

Secretary of State for Work and Pensions, Esther McVey, said: “I urge everyone to check their eligibility and apply for any credits for which they qualify and are entitled to. Don’t miss out on potentially increased pay-outs from your future state pension.”

Claiming national insurance credits

Either parent can apply for child benefit but NI credits will only be allocated to the person who makes the claim, according to HM Revenue & Customs. So the parent without an income should apply. When you apply you can opt for a ‘zero rate’ of child benefit just to get the credits and not the cash.

Where the high earner will be subject to the High Income Child Benefit Charge, HMRC will need to know both the amount of child benefit paid to the household and the total taxable income, which should be done by completing a self-assessment tax return.

While it is estimated that tens of thousands of parents could be missing out on the credits, claims can only be backdated by up to three months.

Former pensions minister and current director of policy at Royal London, Steve Webb, said: “The three-month backdating rule should be relaxed. Instead, birth registration records should be used which can then be compared with the child benefit records to find the ‘missing’ families who should then be proactively contacted.”

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