The way you claim child benefit could affect your state pension – here’s everything you need to know

The way you claim child benefit could affect your state pension – here’s everything you need to know
Hundreds of thousands of parents could be losing out on a £250 boost to their future state pension due to the way they claim child benefit. Shutterstock.

Hundreds of thousands of parents could be losing out on a £250 boost to their future state pension due to the way they claim child benefit.

Figures obtained from HMRC by Royal London show that in more than 200,000 couples, the higher earner is claiming the child benefit – something that often happens unwittingly when one takes time off work to raise a child.

But what they might not know is that the parent claiming child benefit earns National Insurance ‘credits’ that count towards their state pension. The working parent probably already pays National Insurance, so does not need the ‘credits’ they are unknowingly being given.

In these cases, the lower-earning parent is missing out on hundreds of pounds a year in their future state pension.

How to fix it

If you find yourself in this situation, there is no need to panic. The problem can be fixed – even after the event – by completing a little-known government form.

The National Insurance credit can be transferred to the lower earning parent by switching who claims the child benefit, using a CF411a form, which can be found here.

Steve Webb, Director of Policy at Royal London said, “It is quite right that parents who are looking after children get protection for their state pension record if they are out of paid work.

“But this protection only works if the ‘right’ parent claims Child Benefit. It is very worrying that in around 200,000 families one partner is potentially missing out on the state pension protection that is rightfully theirs.

“Whilst this can be fixed by filling in the relevant form, many people will be unaware of this. HMRC should do much more to alert people who might be affected in order to make sure that many thousands of parents do not end up being penalised in retirement.”