My family saved £7,000 with Martin Lewis’ tip: how to fix child benefit mistake
A FAMILY have told how they saved £7,000 and increased their state pension by £3,000 with a tip from Martin Lewis. Here’s how you can do that too.
The simple trick is to transfer the National Insurance (NI) credits you earn when claiming child benefit.
Writing to MoneySavingExpert.com, David said: “My wife has a low-paid job so she doesn’t contribute to NI, leaving her state pension with a ten-year gap.
“We had been thinking about making voluntary contributions, but then I read your child support article and realized as I was claiming it that I could transfer all child support credits to my wife.
‘She got ten years of free NI credits, which would have cost us around £7,000.
‘An enormous burden on our minds. Thank you.’
Martin Lewis added: “And that would probably increase her state pension by about £3,000 a year.”
It comes after the Consumer Champion reported that around 200,000 people are losing out because the wrong partner is claiming child benefit.
Martin said: “HMRC says 200,000 parents are losing out because they are claiming 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 has to be the lower earning member of the couple who applies, as if you earn, or ever earn, less than £123 a week, you will get NI credit that you would not otherwise have, potentially boosting your future state pension, which can rise to £10,000 over the years.
“You can fill out a form to transfer the credits to the lower earner.”
What is child benefit?
Child benefit is paid to parents to help with childcare costs.
Payments are usually made every four weeks, and if you claim child benefit, you will also receive national insurance contributions that count towards your state pension.
Currently, parents can claim £24 per week for their first or only child: £96 per month and £1,248 per year.
But from April, the rate for your eldest or only child will increase to €25.60 per week – which works out to around €102.40 per month or €1,334.86 per year.
For any additional children, they can claim an additional amount of £15.90 per week per child – £63.60 per month and £826.80 per year.
And from April you will get £16.95 per week for each other child, which works out to £67.80 per month and £883.82 per year.
You will normally be eligible for child benefit if you live in Great Britain and are responsible for a child under the age of 16.
Parents can also claim maintenance for a child under the age of 20 if he/she is undergoing 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.
Pay attention to child benefit with a high income
IF a parent or carer starts earning more than £50,000, they will have to start paying high income child benefit.
This means you will have to pay back 1% of your child benefit for every £100 of income earned above the £50,000 threshold.
Once you reach £60,000 in annual income, you must pay back the full amount of child benefit.
However, the Chancellor confirmed in his Spring Budget that from April the threshold at which parents must pay the levy will be increased to £60,000.
And in a further boost, Jeremy Hunt announced that the upper limit for child benefit eligibility will rise to £80,000.
Parents have been caught off guard by the complicated rules and extra costs and have ended up with bills running into thousands of pounds.
It is up to parents to notify HMRC if they are liable for the costs and they must file a tax return to pay them.
How can child benefit be used to fill the state pension shortfall?
If you leave paid work or have a low income while caring for a young child, you could end up with a gap in your NI record, which will affect the amount of state pension you can claim.
However, if you claim child benefit you will also get NI points, which you need to receive the full state pension.
If you (or your partner) are not working, or earn less than £123 a week, claiming child benefit can help you earn NI points that you would not otherwise have earned.
You need 30 qualifying years of NI to get the full state pension – currently £203.85 per week – either through contributions from work or credits.
By not claiming child benefit, thousands of parents are missing out on these NI credits and damaging their state pension rights when they retire.
If you don’t have enough years to qualify for a full state pension, adding an extra year to your NI record could increase your pension by £300 per year.
You can claim NI credits without also claiming child benefit.
Even if you don’t want to claim child benefit, you’ll need to complete the form to let HMRC know you want to receive the credits instead.
To make a child benefit claim, visit gov.uk/child-benefit/how-to-claim.
Simply tick this box at number 62 on the form to let HMRC know that you would like to receive NI credits but do not want a cash benefit now.
Child benefits
Everything you need to know about child benefit: