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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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.
David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.
Zoopla: Asking price discounts hit a five-year high – is now the time to buy a property?
News Zoopla’s October House Price Index shows sellers are accepting discounts of 5.5% on average to secure a sale – we reveal where homeowners are taking the biggest asking price cuts
By Marc Shoffman Published
Equity release rates drop – is it worth unlocking cash from your home?
News Lifetime mortgage rates are falling from their record highs - is equity release worth another look?
By Marc Shoffman Published