Boosting Your State Pension and Keeping Child Benefit Entitlement

Whether or not you are entitled to child benefit depends on your personal tax position. If however, you have been automatically claiming child benefit it is important to remember to update HMRC after your child has completed their GCSE’s to advise them as to whether or not your child intends to continue in relevant full time education.

If you do so and you can utilise HMRC’s app to do this then you will continue to be entitled to claim for an additional period. If you do not advise HMRC then child benefit payments will stop automatically from the September following the child’s 16^th birthday. It is really sensible therefore if you are entitled to child benefit to update HMRC as to the position.

HMRC have stated now that tax payers have until 5^th April 2025 to make up any gaps in their national insurance record for the period April 2006 – April 2017.

Generally, you need 35 complete years of national insurance payments or credits in order to receive the maximum state retirement pension and at least 10 complete national insurance years to receive any state retirement pension.

HMRC previously have only allowed individuals to look back over the previous 6 years to make voluntary payments to fill in any gaps but the current period that is being accepted is much longer being April 2006 – April 2017.

This is not something that everybody needs to do. You need to check whether paying voluntary contributions is right for you and HMRC is encouraging tax payers to check their national insurance contribution record and state pension forecast on gov.uk before making a decision to plug the gaps.

The current full state pension is £203.85 per week. Fidelity have published an article, kindly highlighted to us by Jon Harding at Chiltern, (link below) which details what the cost of recreating  a pension at the rate of the full state pension would be at annuity rates and as is evident details that the cost of recreating the state pension at current annuity rates (5.16%) would be £205,430 and the cost of recreating a state pension income via drawdown (4% withdrawal) would be £265,005.

https://adviserservices.fidelity.co.uk/state-pension/

It is all to often easy to dismiss the state pension as being an invaluable asset but as is evident above it can be well worth investing into and plugging those gaps.

Please note that you should always take advice and make your own enquiries to satisfy yourself that plugging any NIC gaps is the right decision for you.

This article is intended for the use of our clients and other interested parties. The information contained in it reflects the author’s view and is believed to be correct at the date of publication. However, it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional legal or financial advice.