A FAMILY has shared how they saved £7,000 with a Martin Lewis tip that could help hundreds of thousands of other parents too.
The simple trick involves transferring National Insurance (NI) credits you earn when claiming child benefit.
Not known, clear with picture deskClaiming child benefit will also earn you NI credits, which you might need to receive the full state pension.[/caption]
Child benefit is paid to parents to help with the costs of childcare.
Currently, parents can claim £24 per week for their first or only child and an extra £15.90 a week for any additional children.
Many aren’t aware that by claiming the benefit, those on lower incomes or out of work can claim free NI credits which boost your state pension years for free.
David wrote to MoneySavingExpert.com and said: “My wife has a low-paid job, so she doesn’t contribute to NI, leaving her state pension record with a 10-year gap.
“We’d been thinking about making voluntary contributions, then I read your child benefit article and realised as I’d been claiming it, I could transfer all the child benefit credits to my wife.
“She got ten years’ worth of free NI credits, which would have cost us approx £7,000.
“A huge weight off our minds. Thanks.”
Martin Lewis added: “And likely that’d boost her state pension by around £3,000 a year.”
It comes after the consumer champion reported that around 200,000 are losing out due to the wrong partner claiming child benefit.
Martin said: “HMRC say 200,000 parents are losing out as they claim child benefit in the wrong partner’s name.
“Only one parent named on the child benefit application form can get the NI years (which you need to qualify for the full state pension).
“Often it should be the lower-earning member of the couple who applies, as if you are earning, or ever earn, under £123 a week, you’ll get an NI credit you wouldn’t have otherwise, potentially boosting your future state pension, which can add up to £10,000s over the years.
“You can fill in a form to transfer the credits over to the lower earner.”
What is child benefit?
Child benefit is paid to parents to help with the costs of childcare.
Payments are usually made every four weeks, plus by claiming child benefit you also get National Insurance credits that count towards your State Pension.
Currently, parents can claim £24 per week for their first or only child – £96 a month and £1,248 a year.
But, from April the rate for your eldest or only child will go up to £25.60 a week – equating to around £102.40 a month or £1,334.86 a year.
For any additional children, they can claim an extra £15.90 a week per child – £63.60 a month and £826.80 a year.
And, from April for every other child, you’ll get £16.95 a week, which is £67.80 a month and £883.82 per year.
You normally qualify for child benefit if you live in the UK and are responsible for a child under 16.
Parents can also claim support for a child under 20 if they are in approved education or training.
When two or more people share the responsibility of caring for a child, it can only be claimed by one person.
Watch out for the high income child benefit charge
IF either parent or carer starts earning over £50,000, they have to start paying the high-income child benefit charge.
This means you have to pay back 1% of your child benefit for every £100 of income earned over the £50,000 threshold.
Once you reach £60,000 of yearly income you have to repay the full amount of child benefit received.
However, the Chancellor confirmed in his Spring Budget that from April the threshold at which parents have to pay the charge will be increased to £60,000.
And in a further boost, Jeremy Hunt announced that the upper threshold to qualify for child benefit will rise to £80,000.
Parents have been caught out by the complicated rules and extra charges and landed with bills for thousands of pounds.
It’s up to parents to notify HMRC if they are liable for the charge and they must file a self-assessment tax return to pay it.
How can child benefit be used to fill in state pension gaps?
If you give up paid work or are on a low income when looking after a young child, you may end up with a gap in your NI record, which affects how much state pension you can claim.
However, claiming child benefit will also earn you NI credits, which you need to receive the full state pension.
If you (or your partner) are not working, or earning less than £123 a week, claiming child benefit lets you earn NI credits you wouldn’t otherwise have earned.
You need 30 qualifying years of NI to get the full basic state pension – currently £203.85 a week – either through contributions made by working or credits.
By not claiming child benefit, thousands of parents are forgoing these NI credits and damaging their state pension entitlement in retirement.
If you don’t have enough qualifying years for a full state pension, adding one extra year to your NI record could boost your retirement by £300 a year.
You can claim NI credits without also claiming child benefit.
Even if you don’t want to claim child benefit, you need to fill out the form to let HMRC know you want to get the credits instead.
Visit gov.uk/child-benefit/how-to-claim to start making a child benefit claim.
Simply tick this box on number 62 on the form to let HMRC know you would like to receive NI credits but don’t want the cash benefit now.
Child benefit
Everything to know about child benefit:
How much is child benefit and when does it stop?
How long does child benefit take to claim and is it means-tested?
What age do child benefits stop and can I claim for a third child?
Are child benefit payments going up and how much more will I get?