Not Claiming the Child Benefit Could Mean Lost Money
Last updated on September 25th, 2019 at 4:17 am
This article discusses the impact on State pension entitlements when a couple chooses not to claim the child benefit, and one of the pair stays at home to care for their children – of interest to those studying for their CII AF1 or R03 exam.
This article is relevant to examinable tax year 2018/19.
We’ve covered the high income child benefit charge in previous articles as it can be (and has been) tested in AF1 and potentially in R03 as well. One point worth reiterating is the fact that those people who have chosen not to claim child benefit and where one stays at home to care for the children are potentially losing out hundreds of pounds of State pension in the future.
Income Tax Charge for High-Income Parents
Child benefit can still be paid to every family with children regardless of the level of income coming into the household, but since 2013, those families considered to have high income now have to pay an income tax charge.
Anyone with earnings of more than £60,000, pays an income tax charge that actually cancels out the value of the child benefit that’s been received; this situation has led many people to simply stop claiming it.
What May Have Been Overlooked
What may have been overlooked by this action is that if one of the couple stays at home to look after the children, not claiming child benefit means they are not going to receive the National Insurance Contribution credits that claiming gives. This could amount to quite a substantial loss of State pension in the future.
Couples who choose not to claim the Child Benefit could be losing out. Share on X
The couples who have had children after 2013 are most in danger of losing out, as anyone who claimed child benefit before the 2013 changes will have been flagged and will receive the credits for a child under 12.
The Advice for Clients
The advice for clients is they should either claim child benefit and accept that the tax charge will cancel this out through self-assessment or fill in the claim form at a zero rate, which will ensure that National Insurance is still credited to count towards future State pension entitlement.
To get the full new State pension individuals need 35 qualifying years – either through contributions or through credits – this has gone up from the 30 years needed by those who reached State pension age before April 2016.
Working age grandparents caring for grandchildren under 12 could also qualify for NIC credits that can then top up their retirement income.
It’s clear then that every credit helps!
Grab the resources you need!
If you’re studying for your CII AF1 exam, and you want to achieve results that will make you proud, you’ll need to be prepared. Grab our free taster to try out one of Brand Financial Training’s resources for yourself. Click the link to download the AF1 calculation workbook taster now!
Alternatively, you can download taster resources for R03 if you’re revising for that exam.
