How looking after grandchildren can boost your state pension by £3,000
Millions of grandparents help out with childcare each year, and while many are happy to do so out of the goodness of their hearts, few realise that spending time with their grandchildren could also boost their state pension payments – if they know the right forms to fill out.
A little-known rule means grandparents who look after children under the age of 12 can earn a National Insurance tax credit worth 1/35 of the full state pension. At current rates, this is around £275 per year.
If someone had been providing care every year since the 2011/12 tax year, and now put in a claim for 11 years, they could add just over £3,000 to their total final state pension.
It is crucial to check if you are entitled to this money, as making the most out of your state pension can make a huge difference to your quality of life in retirement.
Alistair McQueen, of the pensions provider Aviva, said: “The state pension continues to represent the biggest source of retirement income for most people. It is still the foundation upon which millions of peoples’ later-life finances are built.
“The amount of state pension we receive is directly linked to our individual national insurance record. Gaps in our record could cost thousands of pounds in later life.”
How do I know what my state pension will look like?
The first step is to check your state pension forecast. You can do this by visiting the government website at: https://www.gov.uk/check-state-pension
If you have gaps in your National Insurance record, then your forecast will look smaller. You need a 35-year track record to qualify for the full state pension, which for many people will exceed £10,000 per year in the spring.
You can check your National Insurance record here: https://www.gov.uk/check-national-insurance-record. In order to do so, you will need a Government Gateway user ID and password.
You can also request a printed National Insurance statement online, by post if you live abroad or by phone. The government guide to calling the helpline is here: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/national-insurance-enquiries-for-employees-and-individuals
You can also write to HM Revenue and Customs to request a statement at this address:
National Insurance contributions and Employers Office
HM Revenue and Customs
You might be able to claim NI credits for childcare if you are a grandparent or other eligible family member over 16 but under the state pension age. It also applies to circumstances when you have been on jobseeker’s allowance, were on sick pay or were on statutory maternity or paternity pay, as well as others.
You can check all the eligibility criteria for NI credits here: https://www.gov.uk/national-insurance-credits/eligibility
Remember, these are different criteria for voluntary NI contributions, where you have to pay up to fill your record.
For childcare there is no minimum hours rule, which means that dropping and picking a child up from school could qualify for National Insurance credits. The Government also relaxed rules during the pandemic so that entertaining children over video calls could count towards care.
How much could I earn in tax credits?
Grandparents could earn a windfall worth thousands if they have looked after relatives in previous tax years. If someone had been providing care every year since 2011/12, and put in a claim for all 11 tax years, they could add just over £3,000 to their total final state pension.
Grandparents can earn the tax credit if the parent or carer of the child claims child benefit, and can therefore sign over the National Insurance credit to another family member when they go out to work. According to the most recent official figures, 7.74m families claim child benefit.
Sir Steve Webb, former pensions minister and now partner at the consultancy LCP, said it came at no extra cost to the parent or primary carer.
“Some people get worried that it will affect their own children’s NI record, but it does not. This credit is going spare.”
How do I make the claim?
In order to claim under the “specified adult childcare credits” scheme, grandparents need to complete an application form found on the HM Revenue & Customs website.
It requires personal details and specified periods of care, the details of the child’s parent or main carer, and for both the grandparent and the primary carer to sign declarations on the application.
Claimants must be under state pension age when they cared for the child.