Around one in five grandparents over the age of 50 in the UK provide childcare help for their grandchildren, but thousands may be missing out on a valuable scheme that could increase their State Pension entitlement.
Soaring childcare costs mean that a growing number of parents are turning to grandparents to look after their children when they return to work. This not only helps them, but can also have important financial benefits for grandparents, even if they aren’t paid for the childcare they provide. That’s because grandparents who care for grandchildren can claim National Insurance (NI) credits to potentially increase their State Pension by thousands of pounds over the course of retirement.
According to research by charity Age UK, a fifth of grandparents over the age of 50, or around 5m people, currently provide regular care for their grandchildren. Around 21,000 people applied for Specified Adult Childcare credits last year, according to latest figures from HMRC revealed by a Freedom of Information request, and 17,000 qualified.
Sir Steve Webb, a former pensions minister and partner at Lane Clark & Peacock, believes there could be thousands of grandparents who are failing to make use of NI credits to fill gaps in their record.
He said: “Those looking after grandchildren may be able to claim credits transferred from the child’s parent, and this could be a cost-free way of boosting their State Pension.”
If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased.
Alternatively, if you’d like advice on your private pension, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Please note that Fidelius can discuss private pensions, but is not able to advise on the State Pension and defined benefit / final salary (e.g. NHS) pensions.
How National Insurance (NI) credits work
The full new State Pension is £221.20 a week in the 2024/25 tax year, and you need 35 ‘qualifying years’ of National Insurance Contributions (NICs) to qualify for the full amount. You must have at least 10 years’ to receive any State Pension at all. Read more in our article How the State Pension works.
You get a qualifying year for every year you’re in work, and earning above a minimum amount (£123 a week in the 2024/25 tax year) or if you’re paying voluntary contributions. However, parents and carers can also receive National Insurance credits if they’ve taken time out of their career to bring up children under the age of 12, or family who are ill or disabled. You can check your eligibility for NI credits here, although the majority of people should automatically receive any credits they’re entitled to.
Parents who are returning to work can transfer their entitlement to these NI credits to a family member who helps with childcare and who might have gaps in their own National Insurance record. However, parents only receive NI credits if they are registered to receive Child Benefit, which they are entitled to receive if they earn less than £50,000 a year.
How to claim National Insurance credits
Grandparents or relatives helping with childcare must fill in this form to claim Specified Adult Childcare credits. The parent of the child will need to sign the document too to confirm you’re caring for their child during a certain period, and that they agree for their credits to be transferred to you.
Bear in mind that you can only claim for one credit per household, so if you care for two children in the same household you can only claim once. However, if you look after two children in different families, you are able to make two claims. You can call Age UK’s free advice line on 0800 169 65 65 for more guidance and information on how to claim.
Once the relevant form is completed the Specified Adult Childcare scheme works by transferring National Insurance credits from a parent who does not need them to a grandparent or family member who does and who is caring for the children. These credits can fill in gaps in individual National Insurance records, but bear in mind that the scheme cannot be used if you’re over State Pension age. If you’re working and a grandparent, you will not need NI credits as you should already be receiving ‘qualifying years’ on your NI record.
You don’t need to have looked after grandchildren for a particular number of hours to be eligible to claim credits. You could look after them all week or one day a week and potentially benefit from the scheme. If you cared for a grandchild or grandchildren over video or even the telephone during coronavirus lockdowns, when government rules meant you were unable to do so in person, you can still apply for credits. However, this rule only applies to the tax years 2019/20 and 2020/21.
How much are National Insurance credits worth?
These credits can be worth thousands of pounds. For example, a year’s worth of NI credits amounts to 35th of your full State Pension, or £5.82 a week, £302 a year, or around £6,057 over 20 years in retirement. Under current rules, if you haven’t claimed, you can backdate claims to 2011, as this is when the scheme was introduced.
Other family members who are helping to take care of children under 12 within their family can also make use of the credit scheme, such as aunts, uncles, siblings, cousins and parents who don’t live with the child, and partners of relatives.
Finally…
Before claiming NI credits it’s sensible to work out where you stand and if you have any missing years in your National Insurance record. You can find out how much State Pension you’re on track to receive by requesting a State Pension forecast, which will include how much you’re likely to receive based on your current NI record, and how much you’re likely to get if you continue working up to State Pension age.
Bear in mind that the State Pension age is under review and is gradually being pushed back in line with rising life expectancy. At present, it’s set to increase to 67 by 2029 and again to 68 between 2037 and 2039. If your State Pension forecast isn’t as expected, you need to check your NI record, which shows any incomplete years in your record since 2006. If you have gaps, you might want to consider if you can claim NI carer credits, or paying voluntary contributions to fill in these to receive a higher amount in retirement. Read more in our article Is it worth paying to top up your State Pension?
If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased, or for more information check out our guide on How to find the right financial adviser for you.
Alternatively, if you’d like advice on your private pension, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor.
Fidelius are rated 4.7 out of 5 from over 1,250 reviews on VouchedFor, the review site for financial advisors. With your free consultation, there’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Please note that Fidelius can discuss private pensions, but is not able to advise on the State Pension and defined benefit / final salary (e.g. NHS) pensions.
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