Here’s Why Claiming Child Benefit Could Be Good for Your Future Pension

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Most people who are currently considering having a child or who have recently had one don’t really think about their pension, but it could actually be very rewarding. The average age for mothers to have their first child is about 33.3 years old, and if we’re being honest, this is an incredibly young age to think about a pension. Although pension isn’t right around the corner though, claiming child benefit could actually have an increase in the amount of people’s pension. Here’s why.

What is a Pension?

In the UK, the pension is a regular payment made to citizens over 66 years of age. The payment is usually provided by an investment fund which the person or their employer has contributed during the time they’ve worked. So, provided that pension is given to people over 66 years of age and that the average age for a mother to have a child is 33.3 years of age, it’s safe to say that the gap between those two stages of life is pretty wide.

What is Child Benefit?

Child benefit is some sort of an allowance made to parents while their children are still under 16, and in some cases, 20 years of age. The allowance is made by the government and allows parents to easily pay their children’s expenses without having to worry about dedicating much time to work.

So, what do these 2, completely different things, have to do with one another? Well, for that, first you have to understand that most people don’t get their full pension when retiring, and it’s pretty devastating. The only way for someone to get their full pension is for them to have “collected” National Insurance Contributions for 35 years.

How does one collect these credits?

Regardless of whether they’re working or not, when people claim child benefit, they get the contributions credited to their National Insurance account. This doesn’t go on forever though, the contributions stop when that person’s child turns 12.

When working while receiving child benefit, people can actually collect more national insurance credits than they need, so, fortunately, the credits are transferable. This is extremely useful when a person’s spouse, siblings or parents are low on credits, it allows them to share them and provide the other person with a better pension.

Child benefit is mainly for parents who receive less than £50,000 per year; if a parent earns over that amount, they’ll be charged taxes for the allowance. Also, if the parents earn over £60,000 per year, claiming child benefit and denying the allowance is always an option, this allows them to still receive national insurance credits, and avoid paying the benefit’s taxes. This sort of system seems strange, but it helps monitor and protect against mis-sold pension claims in future.

So, for people who claim child benefit for their children, the chances of getting a higher and better pension are much higher than for those who don’t. Even though having a child and retiring are 2 far-apart stages in life, foreseeing your pension’s details can be rewarding.