Child credits for child rearing

Every parent is unique and is aware that children need opportunities and enrichment at every age stage, and the decision whether to remain in employment or not, after the birth of a child is decided upon differently.

For mothers who decide to terminate employment for some time to rear their children, their social security contribution will not be paid and gaps in their contributory history will eventually affect negatively their pension rate to the extent that they may either not qualify for a pension or if they do ,the amount would be measly due to the unpaid contributions.

In order to address this issue of gaps in the mothers’ contributory history, as a result of child rearing, the government has introduced a new legislation – child credits for child rearing with effect from 1st January 2016.

Fathers too are entitled to child credits, provided they stop working to take care of children instead of their spouses. Same conditions as for mothers apply.

Child credits can be seen as contributions paid by the government, as outlined below, which credits would be keyed in for retirement pension claims to fill in gaps and increase the contribution average, hence, better the pension rate. Child credits are credited independently of income gained.

With effect from 1st January 2016, for mothers born between 1952 and 1961, both years included, who would have terminated employment from birth of child up to a maximum of six years of age of child, for child rearing, are entitled to two years of child credits per child.  These credits (up to the third child) (two years of child credits per child) are awarded, irrespective of whether the parent would have resumed employment.

However, in case of a parent having more than three children, such parent would be entitled to one year of child credit from the 4^th child onwards, provided that s/he would have worked at least for a year prior retirement age.  For example, in case of a parent who would have had the fourth child and worked and paid 40 contributions, prior retirement age, only 40 credits will be awarded to the parent in view of the fourth child.

In case of a disabled child, the same conditions apply but the parent would be awarded with four years of child credits instead of two years.

Table 1. Child credits for child rearing for mothers born between 1952 and 1961, both years included

*For mothers born between 1952 and 1961, both years included, from the 4^th child onwards, the number of credits to be awarded depends on the number of contributions paid after the birth of the 4^th child up to a maximum of 52 credits per child.

Fathers are entitled to child credits instead of mothers provided they stopped working to take care of children instead of their spouses. Same conditions as mothers apply.

With effect from 1st January 2016, for mothers, born during or after 1962, who would have terminated employment from birth of child up to a maximum of six years of age of child, for child rearing, are entitled to four years of child credits per child regardless of commencement of employment prior retirement age. This measure is valid for the first three children born.

The entitlement to credits for the fourth child decreases to two years per child and takes into account contributions paid prior retirement age. Hence, if less than two years of national insurance contributions are paid prior retirement age, pro-rata credits accordingly to the number of contributions paid will be awarded.

Moreover, a mother born on or after 1962 of a disabled child is awarded up to a maximum of eight years child credits.

Table 2. Child credits for child rearing for mothers born on or after 1962

*For mothers born on or after 1962, from the 4^th child onwards, the number of credits to be awarded depends on the number of contributions paid after the birth of the 4^th child up to a maximum of 104 credits per child.

Fathers are entitled to child credits instead of mothers provided they stopped working to take care of children instead of their spouses. Same conditions as mothers apply.

Never hesitate to ask for a tentative pension, which will give you an indicative picture of what your pension income will be when you retire.  This will provide you with information that may help you to conclude that when you retire you wish to have a higher pension income – and thus, that you need to take the necessary action to achieve this.