The national insurance credits system is destined to allow individuals and the government to maintain and keep track of contributions. These contributions eventually count towards a person’s “qualifying years”. These qualifying years end up affecting how much state pension a person will receive in retirement. A minimum of 10 qualifying years will be needed to receive anything, with 35 years needed as a minimum to receive the maximum possible. It is possible to receive national insurance credits even if an individual is not paying national insurance itself. An example of this includes a person who claims benefits because they’re ill or unemployed.
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There are two classes of national insurance credits:
Class one: These count towards a state pension and may also help a person qualify for other benefits, such as contribution-based jobseeker’s allowance
Class three: These count towards a state pension exclusively
National insurance credits can be affected rather uniquely by child benefit.
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Child benefit has a unique impact on NI credits (Image: GETTY)
Partners with varying income could utilise this system (Image: GETTY)
As the Money Advice Service details, if a person is working and getting child benefit, they may actually be building up more national insurance credits than they actually need.
Fortunately, if this is the situation, the government will allow individuals with excess credits to transfer them to a partner.
This can be done so long as the partner is either not working, on a low income or simply not paying national insurance contributions themselves.
These transfer claims can be made on a yearly basis after the end of each tax year. The end of the current tax year is in April so it is worth thinking about these claims now.
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There is a specific form the government provides which needs to be completed for transfers to occur.
The CF411A will need to be completed and returned to the state. It can be done online or through the post and there are guidance notes for the document.
This process will need to be followed precisely as the excess credits will never just be automatically handed over to a partner.
As the government details, since 6 April 2010 parents registered for child benefit for a child younger than 12 will automatically receive class three credits. However, to transfer credits to a spouse or partner the application process will need to be followed, otherwise the partner will simply not receive them under any circumstances.
Child benefit is one of the few benefits not rolled into universal credit (Image: EXPRESS)
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Some people may not know just how many pension credits they have or how their record is looking.
Fortunately, the government allows individuals to check on their records. An account will need to be made to do this but once it’s done, the record can be checked any time and additional contributions can be made if there needs to be a “top-up”.
There are a few instances where it will not be possible to receive national insurance credits at all. Usually, self-employed people need to pay class two national insurance which doesn’t generate the same perks.
Also, women who pay a reduced rate of national insurance under the 1977 “small stamp” scheme are unlikely to receive contributions.
Taking advantage of this element could lead to better retirement payments (Image: GETTY)
Due to these rules around child benefit and national insurance contributions, the government encourages signing up for the benefit even if they do not actually need it.
It is possible to sign up to child benefit and opt not to receive the payments. Anyone who is responsible for raising a child who is under 16 can receive child benefit.
There is no limit on how many children can be claimed for but only once person can get child benefit for a child.
Anyone seeking to start this process may need to evaluate their situations with the partner to work out who needs national insurance credits more.