Grandparents allowances: make sure you claim pension benefits for babysitting

Many people may be missing out on future state pension benefits because they’re unaware of grandparents allowances that reward them for caring for young children.

889-kid-634

Childcare credits: you snooze, you lose

© Getty Images

Grandparents who look after young children are failing to claim entitlements.

Tens of thousands of grandparents and other family members may be missing out on valuable future state pension benefits because they're not aware of a scheme designed to reward them for caring for young children.

Introduced in April 2011, Specified Adult Childcare National Insurance credits are aimed primarily at grandparents below state pension age who regularly look after grandchildren while those children's parents are at work, for example who are under the age of 12. The credit can also be claimed by other family members taking on such childcare duties.

The benefit credits these carers with having made National Insurance contributions as if they were themselves working, so that they don't miss out on building up entitlement to state pension benefits. Once the carer reaches retirement, a year's worth of credits can deliver as much as £250 a year in extra state pension potentially worth thousands of pounds to those who live to average life expectancy and beyond.

As many as 100,000 people are entitled to claim the credit, according to government figures, but a freedom of information request submitted by insurer Royal London found that, in the year to September 2017, fewer than 9,500 applications were received. While that represents a significant advance on the previous year (when fewer than 1,300 carers applied), the fact remains that less than 10% of those eligible for the support are receiving the credits to which they are entitled.

How to claim

Claims for each tax year can be submitted from the October following its end so claims for the tax year ending on 5 April can be made from October later that year. However, it is also possible to claim retrospectively for years in which you were eligible but didn't make a claim. In theory, you can go all the way back to the 2011-2012 tax year when the credit was first introduced assuming that your caring duties go back that far. That could add around £1,000 to your basic state-pension entitlement, on top of the estimated £5,000 over a typical 20-year retirement that a single year's claim could net.

To claim the credit, use the CA9176 form, available online from HM Revenue & Customs. The same form can also be used to make a claim for credits from previous years. A separate scheme exists for parents caring for children under the age of 12, who are also entitled to claim National Insurance credits while they are out of the workplace see below for details.

Don't miss out on state-pension top ups

Parents who have opted out of receiving child benefit following changes to the scheme a few years ago could be losing out on valuable state pension benefits, MPs serving on the Treasury Select Committee have warned.

The problem affects families where at least one parent with a child under the age of 12 stays at home. This parent is then entitled to receive National Insurance credits so that they build up entitlement to the state pension in the same way as people at work.

However, these National Insurance credits are triggered as part of the child benefit system and unfortunately, not everyone is registered for that. This didn't use to be the case, but tax charges introduced in January 2013 now reduce or eliminate the value of child benefit paid to families with household incomes of more than £50,000. As a result, many families in this income bracket have not bothered to make a claim (partly because they then have to pay the child benefit back via a self-assessment return), which means that the non-working parent could effectively be giving up part of their state pension inadvertently.

The Treasury Select Committee is now calling for an investigation into how many families have been affected by the problem, which could cost families tens of thousands of pounds of lost income in retirement.

Recommended

Tax return deadline extended – but don't forget to file
Income tax

Tax return deadline extended – but don't forget to file

HMRC is being slightly more lenient about tax returns this year, but falling behind will still incur hefty fines.
25 Jan 2022
UK inflation is at a 30-year high and it hasn’t peaked yet
Inflation

UK inflation is at a 30-year high and it hasn’t peaked yet

UK inflation has hit 5.4% - its highest in 30 years. And it could be heading higher. John Stepek explains what it means for you and your money.
19 Jan 2022
Made money in cryptocurrencies? Don’t forget to pay your taxes – in sterling
Bitcoin & crypto

Made money in cryptocurrencies? Don’t forget to pay your taxes – in sterling

Speculating on cryptocurrencies is akin to gambling in all but one respect, says Merryn Somerset Webb: you must pay tax on any gains, and you must pay…
18 Jan 2022
How to save money when getting a divorce
Personal finance

How to save money when getting a divorce

If you're thinking of getting a divorce, waiting for the new laws in the next tax year could ensure a difficult process becomes a lot cheaper.
18 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022