It’s normal to worry about your financial freedom in your later years. But here Andrew Diver, head of tax for Beatons Group, explores how you could be entitled to a larger state pension pot which will help you in old age.
It was the eagle-eyed accountant of Gillian Chamberlain, a retired riding school owner from Somerset, who spotted an error in the amount of state pension payments she had been handed since retirement.
The 68-year-old had spent years claiming child benefit which had been wrongly omitted from her National Insurance record and a sum of £3,765 over eight years was owed to her due to the government bungle.
Now, after a lengthy battle, her persistence has paid off. But what her case has revealed is that this is almost certainly not an isolated incident.
How much are you entitled to?
The level of state pension due is largely paid by virtue of the number of “qualifying years” a retiree has accumulated.
Currently there is a requirement to have 35 qualifying years of contributions for a full state pension.
Qualifying years are usually achieved through the National Insurance contributions paid when an individual is either employed or self-employed.
But during a period of time when a person is caring for their children, they still qualify even though no contributions are actually paid.
The problem is that entitlement to state pension credit when caring for children under the age of 12 can be missed by HMRC because it is linked to the claim for child benefit.
This can be made by either of the parents of a child so it is important when one parent is not working that they make the claim to become eligible for a state pension qualifying year.
Care should also be taken in claiming child benefit where either parent earns over £50,000 as HMRC introduced a “higher income child benefit charge” to claw back the child benefit from the higher paid.
Take care of your money
To make the most of your state pension entitlement you should look at:
- Approaching retirement – and whether you could contribute to gain additional years entitlement.
- After periods of short-term employment - if you are employed for only part of a year you may only need to make a small level of voluntary contributions to achieve a qualifying year.
- If you have been self-employed - earnings below £6,025 in 2018 are entitled to the small earnings exemption but it may be beneficial to waive the small earning exemption and to pay regardless to qualify for an enhanced state pension.
- During periods where children are below the age of 12 and you are their primary carer.
Get professional help
We regularly work with individuals to ensure they maximise their pensions and we review state pension forecasts provided by the pensions service to ensure that all allowable years have been recorded.
If you would like assistance optimising your state pension to make sure you are not being short-changed, contact Mandy@beatons.co.uk to arrange an appointment or call 01473 659777.