View more on these topics

Gordon Andrews: Planning points for new parents

Advice can help new parents avoid any unnecessary financial consequences of taking time off to have a baby

New parents have an awful lot to think about, with their financial planning often languishing at the bottom of the list. Advisers can add value by highlighting a few significant areas.

First and foremost, new parents must be made aware of the fact they will not be paying National Insurance contributions if they are not working, which can create a gap in their NI records.

Claiming child benefit credit can help them qualify for NI credits – the importance of this being they count towards their state pension.

A big challenge comes in being aware of, and completing, the required forms.

If the application is made as soon as or within three months of giving birth, then they will be able to claim full credit for the time they are not working. If the claim is made after three months, it cannot be backdated.

Protecting children’s inheritances in blended families

Parents who earn between £50,000 and £60,000 a year should be aware they will have to pay some of their child benefit back in the form of extra income tax.

Whichever member of the couple has the higher income will need to fill in a self-assessment tax return so that HM Revenue & Customs can calculate the amount of extra income tax they will need to pay. The amount paid back is equivalent to 1 per cent of their family’s child benefit for every £100 they earn over £50,000 per year.

So if a mother stayed at home to look after a baby while the father earned £51,000 per year, his income would be £1,000 over the limit.

This means the extra tax would be 10 per cent of the child benefit of £20.70 per week. Therefore, they would have to pay extra tax of £107.64 per year (£2.07 x 52).

If either partner earns more than £60,000 per year, they must
repay the entire child benefit as income tax.

The best way for a parent who earns over £60,000 to still be able to claim NI credits but not have to go through the process of filing a tax return is to choose not to receive the payment but still claim the credits.

One other issue that can result from a parent failing to claim, however much they earn, is that their child may not be automatically given an NI number when they are 16 and they might not get access to other allowances, such as the Guardian’s Allowance.

Beyond NI contributions
NI complications are not the only things new parents need to worry about.

They should also think about updating their protection policies to reflect the newest member of their family.

Many of these types of products, such as critical illness policies, can have a child cover option which will enable someone to claim if their child falls ill.

Sometimes child cover will come automatically included, while with other policies it will be an optional extra, which someone will have to actively choose to bolt on.

Does promoting children’s critical illness cover need the kid-glove treatment?

Making sure parents are aware of the nuances of their particular policy is crucial so they can claim if the worst happens.

They may want to consider wrapping the policy around a trust, especially if life cover is included, as this would enable the child to be named or classed as a beneficiary.

New parents may also want to think about the ways they can save for their child.

Many parents opt for a Junior Isa, although one potential issue here is that the child will gain control of the money once they turn 18.

If parents were to invest the maximum contribution of £4,260 a year into a stocks and shares Jisa for 18 years, the child might then have access to over £150,000.

If parents want to keep control, they could consider maximising their own Isa allowance before investing in a junior one.

Having a baby is incredibly stressful but some simple financial planning can help alleviate some of that pressure and make sure parents avoid any unintended consequences as a result of taking time off work.

Gordon Andrews is a tax and financial planning expert at Quilter


Tony Mudd: The critical reviews being missed by advisers

Protection plans should be treated with the same ongoing care as investment and pensions advice How many advisers write investment and pension business and then ignore it – never reviewing continuing suitability, changing client attitude to risk or underlining fund performance? Hopefully not many. It would be an easy way to lose the confidence of […]

Close up Businessman hand holding pen and pointing at financial paperwork with financial network diagram.

Compliance tip: Preparing for compulsory reassessments

In the interest of improving the knowledge of retail investment advisers, the FCA and Chartered Insurance Institute have introduced an annual examination. The Regulated Retail Investment Adviser Re-Evaluation has been launched as an optional resource but is likely to be made compulsory. The exam consists of 100 questions from the CII’s R01 to 5 units […]

Returning Officer Holds Abacus at Houses of Parliament

Budget 2018: Private residence relief rules tightened

In the 2018 Budget, the chancellor has confirmed that from April 2020, the rules regarding private residence relief will be tightened. Private residence relief is designed to protect taxpayers from capital gains tax when selling their homes Talking in the House of Commons, chancellor Philip Hammond said that, “Mr Deputy Speaker, we recommit today to […]

Buxton’s trust raises £100m in IPO

Merian Chrysalis Investment Company raised £100m with its initial public offering – half of the intended £200m – according to a London Stock Exchange notice. It is the first trust created by asset manager Merian Global Investors – a spin-off from Old Mutual Global Investors – which Richard Buxton bought with TA Association for £583m in June. […]


Monitoring your managers and the importance of mandates

The Prudential Portfolio Management Group (PPMG), Manager Oversight team has created a rigorous set of procedures to underpin the ongoing monitoring and management of the various underlying investments within the PruFund proposition. Adrian Gaspar explores. The primary role of the team is to ensure the continued suitability of underlying managers. They also assess whether the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm