Divorce: How failing to claim child benefit could impact your state pension

The interplay between child benefit and state pensions is not necessarily an obvious one. In any event, as part of the disclosure process on divorce, receipt of child benefit (where applicable) as well as basic information about your state pension, will be relevant. 

In this guest blog, tax adviser Sofia Thomas discusses the link between the state pension system and the child benefit system and how to maximise your state pension contributions.

Will failing to claim child benefit impact your state pension?

This will impact you if the following is true

• At some point you stayed at home to care for children (under 12) whilst not on parental leave
• You have not claimed child benefit

What is child benefit?

Very briefly, child benefit is payable to parents and/or guardians who have children under 16 or over 16 but in full time education. The benefit is £21.05 per week for the first child and £13.95 for any additional children.

Why wouldn’t I have claimed it?

 From 2013, some or all of the child benefit had to be paid back if one person in the house earned over £50,000 (all of the benefit had to be paid back if earnings were over £60,000). Therefore, a lot of families chose not to claim the benefit as they would have had to pay it back at the end of the tax year.

Why does this matter?

Rather disastrously, the child benefit system is linked to the state pension system. Non-working parents are entitled to pension credits for years they spend looking after their children (until the youngest child is 12). However, the way the government know that you have been off work to look after children is through the submission of the child benefit form.

Remember that, an individual’s pension credit is tied to their national insurance record.  So if you have been working and earning over £8,631, then your pension credits should not have been impacted.

 How exactly am I impacted?

In order to claim the full state pension when you reach state retirement age you need to have a full contributions record. A full record is 35 years of contributions. If you have say 11 years then you will receive roughly one third of the full state pension. Ensuring you have 35 years of contributions will mean that you get the full state pension (under current rules).  Therefore, it’s important to maximise the number of years of contributions you have as this will directly impact the amount of state pension you will qualify for.

You can check how many years of national insurance contributions you have via your personal tax account. You can set a personal tax account up here.

What can I do now? 

• You should immediately register for child benefit to ensure that you do not incur any additional missing years.
• If you are still living with the higher earner then you should complete the CH2 form here and select No at q.62 which says ‘I do not want to be paid Child benefit but I do want to protect my State Pension’. This notes that you are registering for child benefit but you do not want to actually receive the benefit.
• If you currently claim the benefit, then remember that if at any point you or your current partner start to earn over £50,000 some of the benefit will need to be repaid.  This is done via a tax return.

What about the lost years?

 At the moment it is not possible to backdate missing contributions for years that should have been covered because you were caring for a child. You can choose to make voluntary contributions to cover any gaps. You can find out more information on that here.

Understanding what benefits might be available to you (child benefit or otherwise) and how to maximise your state pension becomes all the more important when you and your partner are going through the divorce process and reaching a financial settlement. Please see Sofia’s previous blog ‘Claiming Child Benefit after Divorce or Separation’

Sofia Thomas is a Director of Sofia Thomas Ltd. She is a specialist divorce tax adviser. Sofia and her team aim to provide straightforward advice on a range of complex UK tax issues whether that be through expert instruction or single joint expert instruction. The views and advice given in this blog are those of Sofia and Sofia Thomas Ltd. If you require information or advice on the interplay between child benefit and the state pension scheme, contact Sofia here.