This guide benefits working dentists with children who want to help a family member who isn’t working and cares for their kids to get a free state pension.
Your state pension and the amount you will be paid are linked to your National Insurance contributions records. You will need at least 10 years of ‘qualifying’ mandatory National Insurance or voluntary contributions (or credits) to get a state pension and 35 years to get a full state pension.
At 2023/24 rates, a full state pension is worth £10,600 a year. If you haven’t contributed the required 35 years to get the full entitlement, it is reduced by the number of years you have contributed.
For example, if you have 23 years of qualifying contributions, you will get a reduced pension of £10,600 * 23/35 = £6,965.
Ensuring you have the maximum number of 35 qualifying years at your state pension age, currently 66 for men and women since April 2020, then it will rise to 67 by 2028, with a further rise to 68 due between 2044 and 2046 is an important part of financial planning for your older age.
If you have missing years, it is possible to fill in them by purchasing extra years, known as voluntary contributions—these cost at 2023/24 rates £907 a year. If you had no qualifying years and needed to purchase 35 years in one go (which isn’t possible), it would cost you £31,745.
National Insurance credits will help parents (or guardians) with a child under 12 who do not work build up a free state pension.
If a working parent receives child benefit and earns more than £12,570 a year, these earnings accrue a state pension entitlement each year, and they do not need to worry about the National Insurance credits.
These credits go to the parent registered for the child benefit by default and are wasted on a working parent.
But this parent can transfer these credits to another parent or grandparent, brother, sister, aunt or uncle (there is no actual caring hours requirement) aged between 16 and their state pension age.
Transferring the credit can help a non-working Mum, Dad, Granny, Granddad, or other qualifying family member get a free state pension. Transfer claims have a backdating option of up to 12 or 16 years maximum.
There are a couple of planning points to consider as follows:
- Consider the effect of doing this on your state pension. Chances are, if you are not working or earning less than £12,570, you will not be getting a national insurance credit through your work, and transferring it away could affect your future state pension entitlement.
- You need to register for child benefits even if you are not getting paid them. Many parents who earn over £50,000 are eligible for child benefit payments but need to repay them and may not have registered because of this. You can still register your child and not get the payment.
- Remember, it’s only children under the age of 12 (it was 16 before 6th April 2010) that qualify for the National Insurance credit.
For Grand Parents
- Check how many state pension years you have already received a contribution for. You can do this at the pension service. If you have over 35 qualifying years, you are due to get a full state pension; there is no benefit to you getting this transfer.
Making this transfer can help a family member who isn’t expected to get a full state pension to get free credits to increase their future payments.
Ps – All you need to know about transferring is at this link: National Insurance credits: Eligibility – GOV.UK (www.gov.uk)