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Grandparent providing childcare? Join 120,000 others claiming pension boost

Grandparent providing childcare? Join 120,000 others claiming pension boost
Paloma Kubiak
Written By:
Paloma Kubiak

More than 120,000 grandparents and family members providing childcare are gaining a £300 annual boost to their state pension by claiming all-important National Insurance credits. Are you eligible too?

With working parents turning to grandparents and other family members to provide childcare for little ones, there is a financial reward they can gain in the process to boost future state pension entitlement.

It’s all to do with the Specified Adult Childcare Credits (SACC) system, which was introduced by the Government in 2011, potentially increasing the state pension by £328 per year or £6,000 over a standard retirement.

If you as the grandparent or family member provide care for a child under 12 while the parent or primary carer is employed or self-employed – and they’re therefore already paying National Insurance contributions (NICs) – the additional NICs they can claim from Child Benefit may not be required.

Instead, these surplus credits can be transferred over to you (the grandparent/family member looking after children) to boost your future retirement funds.

Indeed, in the past eight years, a total of 123,138 caregivers have successfully applied for SACC, according to information obtained from HMRC by wealth manager and financial adviser Quilter.

Are you eligible for the childcare pension credits?

However, of the total 156,933 claims received by HMRC, 33,795 were rejected. So, are you eligible?

Quilter explained that you need to be below state pension age to claim, as SACC was designed to ensure this group who had given up their career to look after children could still build up state pension rights had they continued to remain in work. There’s no minimum number of hours you need to be looking after the child.

Claims are rejected because the applicant already has a qualifying year of National Insurance – usually because they work or receive other National Insurance credits or are receiving Child Benefit for the child. In that case, they will already get the parent’s National Insurance credits automatically.

You can claim if you are an eligible family member and responsible for caring for a child whose parents claim Child Benefit; otherwise, there are no National Insurance credits to transfer.

Additionally, there is only one credit available per Child Benefit claim, regardless of the number of children. For example, even if you care for two of your grandchildren, only one credit can be transferred to you.

The credits are available for transfer only if you are under the state pension age, which is currently 66 years old. Childcare claims can be backdated to 6 April 2011. However, the credits can only be transferred if the parent does not need them and agrees to the grandparent’s application.

Another point to watch out for is that applications for a specific tax year can only be submitted after 31 October of the following tax year.

‘Unsung workforce could fail to benefit’

Jon Greer, head of retirement policy at Quilter, said: “It is fantastic to see more grandparents and other family members take advantage of Specified Adult Childcare Credits. The numbers of people applying for the credit have been steadily climbing, and last year saw the most people apply on record, with this year set to top that.

“These credits are not only crucial for securing the full state pension if you have gaps in your National Insurance record, but they are also a cost-effective method of doing so, versus paying to fill in missed years. It’s worth knowing too that the number of hours a grandparent helps out with childcare is irrelevant to the claim. Even if it’s just one day a week, eligible grandparents should be able to claim.”

Greer added that “more needs to be done to highlight that these credits are available and to educate people on how to correctly apply so they avoid rejection”.

He said: “If not, this unsung workforce of child carers will fail to benefit, despite playing a critical role in keeping the economy going, especially over the summer months when working parents struggle with the rising costs of childcare and grandparents step in to save the day.”

Related: Families to earn £120k before Child Benefit charge kicks in