MARTIN Lewis has issued an urgent warning to anyone earning under £123 a week.
The consumer champion is calling on 200,000 parents who may be losing out on National Insurance credits when claiming Child Benefit.
1
If you’re earning under £123 a week, claiming Child Benefit essentially lets you earn NI credits you wouldn’t otherwise have earned.
This is because you don’t automatically pay any National Insurance on that income.
NI credits allow you to top up your NI contributions (NICs), which you need to get the full state pension when you retire.
The full state pension is only paid to those with a minimum of 35 “qualifying years” of NICs – these are usually built up by working.
READ MORE IN MONEY
If you miss out on contributions because you’re raising children and not working, you can earn credits instead to top up your contributions.
If you don’t fill in the gaps in your NI record you could end up missing out on the full state pension when you retire, which at the moment is worth £203.85 a week or £10,608 a year.
Writing in this week’s Money Saving Expert newsletter, Martin said: “Are you one of 200,000 parents losing out for not claiming Child Benefit in the right partner’s name?
“It’s worth up to £24 a week – and even if you’re earning too much to get financial help, the parent named on the form gets state pension boosting National Insurance credits.”
Most read in Money
He then goes on to explain that it’s crucial that the lower-earning parent is the one who applies for the handy benefit.
That’s because if they’re earning less than £123 a week, they’ll get an NI credit – which they’d otherwise have missed out on.
This credit will then go towards their state pension, rather than to the parent who likely will not benefit as much from it.
He added: “If you’re already claiming in the higher earner’s name, you could be one of 200,000 parents HMRC says is losing out.
“All you need to do is fill in a form to transfer the credits over to the lower earner.”
You can do this on the gov.uk website.
Previously, Martin said on his Martin Lewis Money Show that having the “wrong” parent apply for Child Benefit could cost them £10,000s in retirement.
He said: “There are 200,000 of you out there who are missing out on potentially £10,000s of state pensions because the wrong partner in your relationship is getting the National Insurance credits.
“Now you build up National Insurance years that gives you how much of the full state pension you get in the end.”
But it’s important to note that how much you could be losing out on depends on how many credits you’re missing.
Below we explain what both Child Benefit and National Insurance is.
Who is eligible to claim Child Benefit?
You will normally qualify for Child Benefit if you live in the UK and you’re responsible for a child under 16.
The support can also be claimed for a child under 20 if they stay 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 will live with them or pay at least the same amount as child benefit rates to look after them – for example, for food, clothes or pocket money.
Foster parents can also claim Child Benefit as long as the local council is not paying anything towards their accommodation or maintenance.
Legal guardians or parents who are adopting a child can also apply for support as soon as the child comes to live with them.
What is National Insurance?
National Insurance is a tax on your earnings which is used to fund state benefits.
This includes the state pension, statutory sick pay, maternity leave and unemployment benefits.
If you are a UK national, you should receive an NI number and card automatically before you turn 16.
This number allows the Government to track your earnings and apply the right amount of tax.
Who pays National Insurance?
You pay National Insurance if you’re 16 or over and either:
- an employee earning above £242 a week
- self-employed and making a profit of £6,725 or more a year
If you’re employed, NICs are taken out of your monthly salary, but self-employed people have to pay it through self-assessment.
You can see your contributions if you’re employed by looking at your pay slip.
Once you reach state pension age, you don’t need to pay it.
There are different types of National Insurance – known as “classes” -and the type you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.
How else can you plug holes in your NI record?
You might have holes in your record for various reasons, like if you took time out to raise children, but luckily there is a way to fix it.
If you don’t fill in the gaps you could end up missing out on the full state pension when you retire, which at the moment is worth £203.85 a week or £10,608 a year.
But if you do have holes, you can pay for the gaps to be filled.
Currently, you can backfill holes from 2006 to 2016 and you have until April 5, 2025 to do this.
After this date, you will only be able to backdate payments by up to six years.
This scheme only applies to people who reached (or will reach) state pension age after April 5, 2016.
Though before making voluntary contributions, you need to get a pension forecast and speak to the Government’s Future Pension Centre.
This is because there are some situations in which paying historic contributions wouldn’t boost your state pension.
You can check the full list of who’s eligible for claiming credits on the government website.
It explains the circumstances where you’ll need to claim and when you’ll get it automatically.
READ MORE SUN STORIES
Meanwhile, here are four of the best ways to boost your retirement pot and two to avoid.
Here’s the full list of reasons you might have gaps in your record and risk missing out on the full payment.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories.
