Parents and pensions… the things you need to look out for before it’s too late! [ad]

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Did you know that if you choose to not claim child benefit you are putting yourself at risk of missing out on your state pension when it comes to your retirement age?

Also that by taking unpaid leave at the end of your maternity leave or claiming SMP during which so many of us do, can also affect your pension?

Parents unaware of child benefit pension link

I still struggle massively with keeping up with all the government changes and knowing what I can and cannot claim for so I can’t imagine what it’s like now if you are bringing a newborn into the world.

Your mind is elsewhere with children at all times so when something seems to be difficult to get your head around, you naturally put it to the bottom of the pile to deal with at a later date. If no one chooses to specifically tell you about financial matters like these and how they could potentially affect your future, then chances are you end up finding out about by mistake. The worst-case scenario is that you find out when you’re on the brink of retirement and there is absolutly nothing you can do about it!

Luckily the change, specifically with regards to child benefit, occurred not that long ago so there is still time to prevent it affecting you too much but if you are planning to have children or go on maternity leave soon I’m here to tell you to start doing your investigations now before it’s too late!

How does child benefit affect your state pension?

To qualify for the state pension you are required to have paid National Insurance Contributions (NICs) for at least 10 years. That’s all well and good and achievable for most right? …but that’s not all! To receive the maximum amount you can you’ll need to have paid NICs for at least 35 years which is the majority of your working life!

If you’ve been unable to work or you chose to not return to work after you had your child, resulting in you no longer paying NI via your wage; then you can still contribute to your record with what the Government describes as ‘credits.’

However, what so many people aren’t aware of is that in order for the government to know that you as a new parent, require these credits to be taken into account as NICs that you MUST apply for child benefit.

Even if you don’t think you are eligible or you know you or your partner have an individual income over £50,000 and therefore will have to pay some if not all of it back.. you MUST put in a claim!

High Income Child Benefit Charge

Parents can opt out of receiving the payments if the salary limits apply if you don’t want to have to mess about paying it back but you MUST make an initial claim and ensure you keep contributing to your NI in whichever way you can especially if you are no longer contributing elsewhere.

If you are wanting to check your national insurance record now before it’s too late you can do so via the link above or if you want to see if you are eligible for credits another way then check this out.

How maternity leave affects your pension?

Another part of parenthood that could also affect your pension is maternity or parental leave.

Both you and your employer should continue to pay into your pension whilst you are receiving Statutory Maternity Pay (SMP) but if you usually earn more than what the SMP is then you will inevitably notice a reduction into the amount you are paying into your pension.

I was fortunate in the MoJ that I had my full pay for the first 6 months and SMP for the final 3. If I wanted to take more time off then I could’ve done so but I would’ve got no income at all from anywhere.

What people don’t realise during maternity is that reduced payments over a period of time can affect your pension-pot later on in life and the same goes for if you were to reduce your hours and go part-time at work. You are no longer paying into your pension the same amount you was when you were full-time and if you choose to not work at all or take unpaid leave then you could miss out on months of pension contributions.

What can I do to top up my pension?

One way of ensuring you are not left short-changed come retirement is to either start adding to your own private pension as early as you can or increase what you pay via your employers pension scheme.

If, like I did, you manage to save up the difference in your wage and SMP to ‘top up your wage’ for a short period of time, then don’t forget to also put some aside for your pension.

If you find you have some gaps in your NICs due to deciding to not claim for child benefit then you can look at filling them voluntarily so don’t panic.

If you decide to not go back to work & work from home or you reduce your hours further, you too can choose to either up your NI contributions OR combine your old pension together with a new private pension one and have them all in one place.

PensionBee offer this service by consolidating your old pensions and transferring them into a brand new plan, that you manage online. You can then manage your pensions savings in one place and start building a better retirement for whatever your reason you are needing or wanting to do so.

If you want to see how much you will get at retirement age or want to set yourself a goal check out their pension calculator and see how much you’ll need to save each month to reach your target or make up what you’ve missed out on. It’s really good to see and gives you a good idea of how close you are to your target or how much is likely to be in your pot come retirement.

I really hope this has helped any parents or parents-to-be in planning for your future and if you have any questions feel free to click any of the links above that will take you to the relevant pages and should answer any queries you may have!

This post is in collaboration with PensionBee.

If you got value from this post then do let me know and feel free to share with your friends or PIN to read again later!

If you are looking for other ways to invest in your future or more information on pensions then feel free to check out some of my previous posts below:

How much do I need to retire?

When should I start to invest in my future?

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About The Money Saving Mum

About The Money Saving Mum

I've always been financially savvy but when the kids came along I needed to up my game! Our finances and priorities changed overnight and it felt like I was spending money as if it was going out of fashion! I needed to start earning extra money just to make ends meet and continuously make sure we got the most out of every single penny we had! Sound familiar? Keep reading... I'm sharing my story to help people like you!

Kirsty

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