How Not To Miss Out On Thousands Of Pounds Of Pension Income
If you are a grandparent caring for grandchildren, you could qualify for National Insurance credits which can top up your income in retirement. From April 2011 grandparents under State Pension age who care for grandchildren under 12 can apply for a benefit known as Specified Adult Childcare credits.
An estimated 4 in 10 grandparents in the UK provide childcare for their grandchildren and many don't know about this perk which could add thousands to their State Pension over time. More and more grandparents will be entitled to the Specified Adult Childcare credits as the proportion of grandparents who are of working age is growing due to the increases in the retirement age. Added to this is the increase in childcare costs, meaning that more parents are relying on their parents for help.
If a parent is not working, or is earning under £190 a week, claiming Child Benefit essentially lets them earn National Insurance credits which they wouldn't otherwise have earned. If both parents are working and don't need the National Insurance credits, they can transfer them to a grandparent or family member who does need the credits and who contributed to childcare.
For the new State Pension you need 35 qualifying years of National Insurance contributions or credits to get the full amount at State Pension Age. You get a proportion of the new State Pension if you have between 10 and 35 qualifying years. If you have gaps in your State Pension record, claiming the Specified Adult Childcare credits could close these gaps and add thousands to the value of your State Pension over time.
How do Specified Adult Childcare credits work?
Working parents who claim Child Benefit can transfer the National Insurance credits they receive to the child's grandparent or other adult family member for the previous tax year. The person receiving the National Insurance credits needs to be of working age and looking after a child under 12. These National Insurance credits will count towards their State Pension. The system of transferring the National Insurance credits means that grandparents no longer have to lose out on building up a full State Pension just because they are looking after their grandchildren. If no one has claimed Child Benefit for the child that's being looked after, there is no attached National Insurance credit to transfer and therefore Specified Adult Care credit cannot be awarded.
How valuable are National Insurance credits?
In the 2022/23 tax year, the full new State Pension is £185.15 a week. One year of National Insurance credits can be worth 1/35 of £185.15, which is £5.29 a week or £275 a year. This means that someone claiming these National Insurance credits for a year could get an extra £275 on their State Pension, which adds up to thousands over the course of a typical 20-year retirement. Apart from this tax year, the State Pension has increased each year in line with the triple lock commitment since 2010. The triple lock commitment means that every April the State Pension increases by the highest of:
Average earnings between May and July
The rate of inflation (measured by the consumer price index in the year to September)
The triple lock was suspended for the current 2022/23 tax year as the average earnings figure was skewed by the pandemic and was significantly higher than inflation. However, the State Pension still increased by 3.1%, so making up the gaps in your State Pension is very valuable.
You will receive Class 3 National Insurance credit for each week or part week you cared for the child.
Who should apply?
You need to check your National Insurance record online to see if you have any gaps for the time you looked after the child or children. If you don't have any National Insurance gaps then you don't need to apply.
You should apply for the Specified Adult Childcare credits if you have gaps in your National Insurance record and have cared for or are caring for a child under the age of 12. There is no minimum-hours rule for how many hours a week you cared for them. It's worth bearing in mind that during the coronavirus lockdowns (2019/20 and 2020/21) if you cared for a child by video or over the phone then you can still apply for the credits.
It's not just grandparents that can benefit from the credits. National Insurance credits can also be transferred to other family members such as aunties and uncles. The parent claiming Child Benefit must not have a need for the National Insurance credit that they automatically get through claiming the Child Benefit (for example, they worked that year and received National Insurance contributions).
How to apply
To claim the Specified Adult Childcare credits you need to complete an application form and the grandparent and child's parent (or main carer) must apply for the credits to be transferred. The child's parent or main carer needs to countersign the application form to confirm that the grandparent cared for the child during the period stated and that he/she can have the Class 3 National Insurance credit for the period stated.
If you haven’t yet claimed, you can backdate to 6 April 2011, which is worth doing to maximise your State Pension. Go to gov.uk to find the form to apply for the credits. Applications need to be made in the October following the end of the tax year in which the caring took place. This is because they need to check that the parent or carer receiving the Child Benefit already has a qualifying year for National Insurance purposes and that can take until October.
If you have any questions about Specified Adult Childcare credits then you can call the helpline on 0300 200 3500. They are open Monday to Friday between 8am and 8pm and on Saturdays from 8am to 4pm.