Martin Lewis is warning anyone earning less than £123 a week
MARTIN Lewis has issued an urgent warning to anyone earning less than £123 a week.
The consumer champion is appealing to 200,000 parents who could miss out on national insurance credits if they claim child benefit.
If you earn less than £123 a week, claiming Child Benefit can actually earn you NI credits that you would not otherwise have earned.
You do not automatically pay national insurance on that income.
NI credits allow you to top up your NI contributions (NICs), which you need to receive the full state pension when you retire.
The full state pension is only paid to people with a minimum of 35 'qualifying years' of NICs – these are usually built up through work.
If you're missing out on contributions because you're raising children and not working, you can earn credits to supplement your contributions instead.
If you don't fill in the gaps in your NI record, you could miss out on the full state pension when you retire, which is currently worth £203.85 a week or £10,608 a year.
Writing this week Newsletter Money Saving ExpertMartin said: “Are you one of the 200,000 parents who are suffering because they don't claim child benefit in the right partner's name?
“It's worth up to £24 a week – and even if you earn too much to get financial help, the parent named on the form will get a state pension to increase National Insurance Credits.”
He then explains that it is crucial that the lower-earning parent is the one applying for the convenient benefit.
That's because if they earn less than £123 a week they will get NI credit, which they would otherwise have missed out on.
This credit then goes to their state pension, rather than to the parent who is unlikely to benefit as much from it.
He added: “If you are already claiming on behalf of the higher earner, you could be one of the 200,000 parents who HMRC say are losing out.
“All you have to do is fill out a form to transfer the credits to the lower earner.”
You can do this on the gov.uk website.
Previously on his Martin Lewis Money Show, Martin said it could cost them £10,000 if the 'wrong' parent claims child benefit.
He said: 'There are 200,000 of you potentially missing out on £10,000 in state pensions because the wrong partner in your relationship is getting National Insurance Credits.
“Now you build up national insurance years, with which you ultimately know how much of the full AOW pension you will receive.”
But it's important to note that how much you could lose depends on how many credits you miss.
Below we explain what child benefit and national insurance are.
Who is eligible for child benefit?
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.
The aid can also be applied for for a child under the age of 20, if he or she is in approved education or training.
But when two or more people share caring responsibilities for a child, it can only be claimed by one person.
To be considered responsible for a child, you must live with the child or pay at least the same amount as child support to care for the child, for example food, clothing or pocket money.
Foster parents can also claim child benefit as long as the municipality does not pay anything for their housing or maintenance.
Legal guardians or parents who adopt a child can also apply for support once the child comes to live with them.
What is National Insurance?
National Insurance is a tax on your income used to fund state benefits.
This includes the state pension, statutory sick pay, maternity leave and unemployment benefits.
If you are a British national, you should automatically receive an NI number and card before you turn 16.
This number allows the government to keep track of your income and apply the correct amount of tax.
Who pays for the National Insurance?
You pay National Insurance if you are 16 years or older and:
- an employee earning more than £242 per week
- are self-employed and make a profit of £6,725 or more per year
If you are employed, NICs will be deducted from your monthly salary, but self-employed people must pay this through self-assessment.
If you are employed, you can see your contributions on your pay slip.
Once you reach state pension age, you no longer have to pay it.
There are different types of National Insurance – sometimes called 'classes' – and the type you pay depends on your employment status and how much you earn, and whether there are any gaps in your National Insurance file.
How else can you close gaps in your NI record?
There may be gaps in your record for a variety of reasons, such as if you've taken time off to raise children, but luckily there is a way to fix this.
If you don't fill in the gaps, you could miss out on the full state pension when you retire, which is currently worth £203.85 a week or £10,608 a year.
But if you have holes, you can pay to fill the holes.
Currently you can fill gaps from 2006 to 2016 and you have until April 5, 2025 to do so.
After this date, you can submit payments retroactively for up to six years.
This scheme only applies to people who have reached (or will reach) state pension age after April 5, 2016.
However, before you can make voluntary contributions, you must first make a pension forecast and speak to the The future government pension center.
This is because there are situations in which paying historical premiums would not increase your state pension.
You can check the full list of who is eligible to claim credits on the government website.
This explains the circumstances in which you need to make a claim and when you will receive it automatically.
In the meantime, here are four of the best ways to increase your pension pot and two to avoid.
Here is the full list of reasons why there are gaps in your file and you are at risk of missing out on full payment.
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