June 6th, 2017
If you are the parent of a young child, born since 2013, then you need to make sure that you are not neglecting your State pension, as you may no longer be contributing to a private pension.
Since child benefit means testing rules came in to force, a lot of people don’t bother to claim if their partner is earning £50,000 or more, as the monetary benefit element will reduce and may even stop.
However, there is still benefit in claiming. Even if you don’t benefit from the monetary element of child benefit, it will mean that National Insurance (NI) contributions will still be made on your behalf, and will continue to make up some of the years that you need to be entitled to claim the full State pension.
Under current legislation, you need to make 35 years’ worth of NI contributions to be entitled to the full State pension, which is currently valued at £155.55 per week. You can claim a reduced level of State pension if you have made at least 10 years’ worth of NI contributions.
With Child benefit being paid from birth to the age of 16, and NI contributions being made on your behalf from the birth of the child until they reach the age of 12, you can ensure that you are going to be entitled to some level of State pension automatically as you have already made 12 years’ worth of contributions through your child benefit claim, making it a worthwhile exercise, as for every year of NI contributions that you miss, you are losing out on about £231 per year.
Now obviously, the State pension is never going to give you the holidays in retirement that most dream of, but it is going to go some way to ensuring that you can at least pay some of the bills. If you’re lucky enough to continue to get employer contributions to an occupational pension whilst on maternity or paternity leave, then ensure that this is happening as again the amount of savings that can be made in that time could be significant.
It is the same for those that are self-employed and contractors. If you find that you have the retained profits in the business, then continue to use these to pay in to a pension, as this is still the most effective way of saving tax and investing money for your future.
If you would like advice on any of this, then don’t hesitate to get in touch and get some financial planning, as no matter when you start your future provisions, something is better than nothing, and we can help you maximise what you could get to make your money work as hard as you.
For further information please contact Duncan Craze, Financial Planner at our sister company Contractor Wealth for further information.
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Financial advice is given by Contractor Wealth Management Limited. Registered in England and Wales under Company number 07773485 at 9 London Road, Southampton, England, SO15 2AE. Contractor Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority under FCA Register reference 582895 and is an appointed representative of Intrinsic Financial Planning Limited; on the FCA Register under reference 440703 and Intrinsic Mortgage planning Limited as reference 440718.
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