HUNDREDS of thousands of grandparents are missing out on a pension perk that could add thousands of pounds to their income in retirement.
Many grandparents pick up their grandchildren from school, take them to the park or look after their loved ones during the school holidays.
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But these grandparents may not realise that they might be able to boost their State Pension as a result.
Specified Adult Childcare credits are a type of National Insurance credit that can help you qualify for the full state pension.
You need 35 years of National Insurance contributions to get the full new state pension, which is worth £230.25 a week.
To claim these “grandparent credits”, a parent who receives child benefit must also be paying National Insurance.
Read more on the state pension
This could be because they have gone back to work.
They must be able to work because another family member is looking after their child, who is aged under 12.
In this case, they can transfer the National Insurance credits to the family member who helps with childcare and has gaps in their record.
Every year of credits is worth one year of National Insurance contributions – or one 35th of the full state pension.
At current rates, this works out at £342 a year, or £6,840 over a typical 20-year retirement.
If you claim for multiple years the payout could be even higher.
For example, if you backdate your claim for three years then your state pension payments would be boosted by £1,026 annually.
This would add up to £20,520 over a 20-year retirement.
There is no minimum number of hours you need to be looking after a child to qualify.
Jon Greer, head of retirement policy at Quilter, said: “These credits are a lifeline for those who step in to provide invaluable childcare support, ensuring they don’t miss out on their State Pension entitlements.
What are the different types of pensions?
WE round-up the main types of pension and how they differ:
- Personal pension or self-invested personal pension (SIPP) – This is probably the most flexible type of pension as you can choose your own provider and how much you invest.
- Workplace pension – The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out.
These so-called defined contribution (DC) pensions are usually chosen by your employer and you won’t be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. - Final salary pension – This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you’ll be paid a set amount each year upon retiring. It’s often referred to as a gold-plated pension or a defined benefit (DB) pension. But they’re not typically offered by employers anymore.
- New state pension – This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you’ll need 35 years of National Insurance contributions to get this. You also need at least ten years’ worth to qualify for anything at all.
- Basic state pension – If you reach the state pension age on or before April 2016, you’ll get the basic state pension. The full amount is £156.20 per week and you’ll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what’s known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes.
“Even if it’s just one day a week, eligible grandparents should be able to claim.”
Only around 17,000 people successfully applied for the credits between October 2023 and April 2024, which means thousands of people could be missing out, according to Quilter.
To apply you must be under the state pension age, which is currently 66 years old.
It is not just grandparents who can claim the credits.
Eligible family members can also include a parent who does not live with the child, aunt, uncle, brother, sister, great-grandparent or great-great-grandparent.
You can backdate your claim to 2011, when the credits were introduced.
Plus, if you provided care during the pandemic then you can apply for the 2019-2020 and 2020-2021 tax years.
This includes if you provided care in a different way, for example by telephone or FaceTime.
Jackie Spencer, head of money and pensions policy at the Money and Pensions Service, said: “If you’re a grandparent or another relative looking after children while their parents are at work, it’s worth checking the UK government website – gov.uk – to see if your family is eligible.”
How do I claim?
You need to wait until October 31 to apply for the current tax year.
This is because HM Revenue and Customs (HMRC) needs to check that the parent or main carer already has a qualifying year of National Insurance.
The child’s parent or main carer should first check their National Insurance record to make sure they have credits they can transfer.
They can check their National Insurance record on the gov.uk website.
Before you apply you will need your contact details.
You will need the child’s details and a record of the periods you provided care for them.
You will also need the personal details of the child’s parent or main carer who receives the child benefit.
Both you and the person who receives the child benefit need to sign a declaration on the application form.
You will then need to complete the form CA9176 online.
You cannot save your progress, so make sure you have all the information to hand before you start.
Next you will need to print and post the form to HMRC using the postal address shown on the form.
Once you have submitted your form you can check when you should expect to receive a reply online.
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